• Ешқандай Нәтиже Табылған Жоқ

The features of «productive» function of the state as economic subject

In article are considered features of «productive» function of the state as economic subject. Need and expedi- ency of the state production of the net public benefits is most obvious. Not excludability is absolutely insu- perable to them, and obviously there is no opportunity to replace expenses of the state coercion, if they are ra- ther high, expenses on creation of a market mechanism of restriction of access to this benefit for «hare».

When consumption is absolutely noncompetitive, price quotation of public goods or service in Pareto princi- ple is inefficient as consumption of additional unit of the benefit brings benefit to the consumer without any expenses. Price quotation will reduce consumption, having caused under exploitation of the public benefits and a dead loss of usefulness. When the supply of net public goods through the market is possible, it won't provide achievement of the best (optimum) level of production. Result of research of authors is detection of features of «productive» function of the state on the example of the Republic of Kazakhstan, and also the problems which arose recently connected with the researched subject.

Keywords: «productive» function, public benefits, state expenditures, social production, social aid, social se- curity.

І. Statement of a problem. The condition and dynamics of the sphere of production as initial stage of a reproduction cycle predetermines proportions and development of its other phases. It demands active eco- nomic participation of the state in this sphere, in particular, through realization of a «productive» component of production function.

Productive function is a form of manifestation of economic behavior of the state in the production sphere for the purpose of ensuring its balance. Allocate two effects of this function: first, productive function in pure form, being shown in direct state production of the public and private benefits; secondly, the mediat- ed productive function consisting in indirect impact on motivation and behavior of private producers.

Net productive function of the state is realized through production of the public benefits in state sector of economy. It is possible to prove need of the state production of the public benefits through detection of their specifics.

ІІ. Analysis of the last researches and publications

The theoretical bases of analysis of production of the public benefits was laid within the neoclassical theory of welfare. Theoretical bases of production of the public benefits and positive outer effects were cre- ated in works of representatives of the theory of welfare, such as N.Kaldor, E. Lindal, A. Marshall, V. Pareto, A. Pigou, P. Samuelson, T. Scitovsky, J. Hicks, H. Hotelling.

The theory of the public benefits is connected with the theory of public sector of economy in which the state is researched as the specific subject of modern economy. Questions of the theory of the public benefits were taken up by such authors as E. Atkinson, J. Stiglitz, J. Buchanan, J. Dupuy, R. Musgrave, M. Olson, K. Arrow. Bases of the theory of a budget federalism as systems of differentiation of powers on provision of the public benefits are pledged in works of D. Kings, R. Musgrave, W. Oates.

ІІІ. Article purpose

Many theoretical and practical questions of the public benefits, including problem of increase of effi- ciency of their production is one of the most perspective directions of modern economic science as many theoretical and applied aspects didn't gain due development yet. In particular, in case of all importance of the conducted researches there is no constructive classification of the public benefits. The theoretical and practi- cal importance of studying of these problems, need of application of new approaches also determined a choice of a subject of research, the purposes and tasks of work.

ІV. Main results of research

The concept of the public benefits was put forward by P. Samuelson in 1954 and further is developed by R. Musgrave in the theory of socially significant (deserved) benefit in the late fifties [1, 2]. P. Samuelson marked out two main properties of the public benefit – non-competitiveness in consumption and non exclud- ability.

Criteria of competition and non-competition, excludability and non excludability allow drawing a clear line between the net private and net public benefit. The first represents a competition and excludability com- bination, and the second is characterized at the same time by two properties – absolute non-competitiveness and not excludability. Considered polar situations can be described as follows: for net private goods equality takes place:



i h

i X



, (1)

where Xih— consumption of i-goods by h-household;


i— aggregate supply of i-good.

Contrary to it for net public goods

i h

i X

X  , at any h. (2)

The net public benefit and the net private benefit are extreme points of a scale of the economic benefits.

Between them there are much more often the mixed different benefits meeting in reality which proximity to this or that pole is defined by prevalence of properties of private or public goods. The mixed public benefit unlike pure is the excluded benefit of joint consumption with selectivity, alternativeness of its use, with de- crease of its consumption.

The following group of the public benefits is also possible taking into account a set of the correspond- ing parameters (Table 1).

Specifics of the public benefits (pure and mixed) consist in the following: the external effect has impact not only on the direct participants of activity connected with this benefit, but also extends on foreign faces, generating a so-called problem of «free rider». The market mechanism effectively works to the economic benefits only on condition that their external effect can be controlled by participants of the transaction con- nected with this benefit.

In a situation with the public benefits ways and methods of internalization of external effects, solutions of the problem of «free riders» are defined by the volume and intensity of external influence, its positive or negative character, possibility of divisibility of these or those public benefits, degree of their excludability and alternativeness in consumption, and also possibility of quantitative change of an external effect. If scales of external effect are insignificant and a circle of subjects is small, and production of this public benefit and its collateral external action can be taken without participation of the state under control by direct partici- pants of the economic transaction or self-governed public organization. If the problem of «hare» gains wide scope, systematic underproduction of the public benefits is formed, and there is a situation at which delivery of the benefit has to be carried out by the state.

Providing adequate output of the pure public benefits possibly only at public and obligatory approach to formation of funds for their creation by means of the compulsory state taxation. At domination of free busi- ness the market economy isn't democratic. The state independently defines standard item of the public bene- fits and appoints taxes, without reckoning with, whether individuals want to have these goods and services in such quantities or not. Therefore it is necessary to aspire that all pure public benefits delivered to the individ- ual, corresponded to his compelled contribution.

Problem in that: the state has to define output of the pure public benefits, and also quantitative range of the specific taxpayers bringing means for consumption. «Therefore the political mechanism steps on the stage as substitute of the market and determinant of the directions of action of the state coercion» [3].

Taxpayers at the same time are also voters; the effective instrument of tax regulation of production of the pure public benefits is the electoral system by means of which society expresses the preferences to elect- ed representatives in authorities depending on their positions. Decision-making by vote replaces detection of preferences through a market mechanism that is the public choice in public sector carries out a certain self- correcting function, as a consumer choice – in the private sector. The self-correcting effect of a public choice of subjects is stronger, than the level of development of political democracy is higher. Then at the certain individual is reduced the gap distance between its role of the taxpayer and a role of the consumer of the net public benefit.

The features of «productive» function of the state…

Table 1 Classification of Public Benefits with Combination of Its Criteria (properties) Criteria

Net public benefit Mixed public benefit national levelregional, lo- cal levelsocial benefit (deserved benefit) quasipublic benefit (ser- vice of branches of natural monopoly) the overloaded benefit of joint consumption benefit of limited access (the club benefit)

usual type (with prevalence of private proper- ties) Level of competi- tion and decrease in con- sumption

Sharing with com- plete non- competitive and non- decrease Sharing with complete non- competitive and non- decrease Joint nature of consumption with high level of non- decrease of vol- ume and quality of consumption Joint nature of consump- tion of services of a net- work type of production and high decreasing of not network production

Jjoint nature of the consumption in the non-competitive and nondecrease to a cer- tain threshold level of consumption and reducing its then lev- el Joint nature of con- sumption at stable level and quality of consumption for a certain structure of users

Joint nature of consumption pat- terns with a high level of competi- tion and decreas- ing Excludab ility level Full non- excludabil- ity

Full non- excludability The high level of excludability The high level of excluda- bility Non-excludability to some consumption level Application of the principle of excluda- bility not to the cer- tain person, and to group of people

The high level of excludability Exist- ence of a specific external effect

The external effect has national and world value Regional and local external effect Huge scale of an external effect and its long-term character Generation is social losses, and social benefitsThe external effect can be localized and is under control of owners of these bene- fits The external effect is internalized through public coercion (membership dues)

Positive or nega- tive orientation of an external effect Nature of productio n

State pro- duction State produc- tion Production of the benefits by the state, public and private structures Production of the benefits by the government and private monopolistic insti- tutions Production of the benefits by the gov- ernment and private institutions Production of the benefits by public structures

Production of the benefits by pri- vate structures Typical examplesNational defense, fundamental science, satellite communica- tion, etc.

Municipal police, fire protection, vacation spots etc.

Services of health care, education, culture etc.

Railway transport, tele- communication, municipal services of the population by electric power, water, gas, heat, etc.

Bridges, tunnels, highways, locks, etc. Services of sports clubs, beaches, parks, etc.

Medicines and medical equip- ment, tobacco, alcohol, ecologi- cally harmful technologies, etc. Note. Source: It is made by the authors.

The market mechanism isn't capable to function effectively in the sphere of production of the mixed public benefits, as socially significant benefit (the deserved benefit) and the quasi public benefit.

Socially significant benefit synthesizes properties of the private excluded benefit and property of the public benefit through considerable positive external effect. Such benefits consist from education, health care, culture, services of other branches of the welfare sphere.

The specific nature of the deserved benefit, multi composite character of an external effect, long term of its influence and lack of accurate contours of influence create an objective basis for emergence of contradic- tions between the current individual and long-term public preferences in consumption of such benefits. It is necessary a certain state intervention for permission of this collision in favor of public preferences and intro- duction of obligation of consumption of socially significant goods and services. Otherwise at freedom of a consumer choice there are no guarantees that citizens won't prefer to spend funds for the current consump- tion, but they don’t spend funds for the deserved benefits [4].

The most serious insolvency of the market causing emergence of the state production of the mixed ben- efits arises when the markets aren't competitive. The main reason acts existence of growing economy at pro- duction scales. In this situation economic efficiency demands limited number of producers. The branch in which economy growth at scales is so considerable, functions only one firm, is natural monopoly.

The benefits made in branches of natural monopoly, are the quasi public benefits. In the excluded bene- fits of joint consumption there are more than properties of private goods and much less characteristic proper- ties of the public benefit. Specifics of these branches are in large scale of production and a considerable capi- tal intensity that makes high demands of the volume of the initial capital for the accession to these branches of new competitors. The characteristic transmission of technologies for branches of natural monopoly (net- work type of production) excludes infrastructure duplication on providing the population with this produc- tion, doing technically impossible existence of the competitive environment.

The state intervention to the sphere of production of the quasi public benefits consists that private firms pursue the aim of maximizing own profit, instead of welfare of the nation that conducts to inefficient distri- bution of resources. The state chooses one of two possible options of behavior without having opportunity to eliminate zones of natural monopoly without efficiency loss: or to fill these zones with the enterprises of public sector, or to use measures of indirect regulation of activity of the monopolist [5].

The state, functioning as the producer in the natural and monopoly environment, is guided by other principles of managing, than private firms. It allows to use the sphere of the state delivered quasi public ben- efits for the solution of strategic economic tasks, increases of profitability of private enterprise. The monopo- ly profit isn't the paramount purpose of activity of the state as producer of the quasi public benefits. It be- came the supplier of cheap services (in particular, transport, post and cable), energy resources (coal -, gas -, oil production, electricity generation), reducing expenditures in the private sector.

If scales of external effect are insignificant also the range of market agents is small, other kinds of the mixed public benefits it isn't required direct state intervention. Collateral external influence can be without state participation, is internalized by self-governed public organization or direct participants of the transac- tion on mixed the benefits.

Approximate idea of the high possible scales of implementation by the state of direct productive func- tion can be received on the basis of data on specific expenditures on production of the public benefits in gross domestic product of the developed countries given in Table 2.

Table 2 shows the considered period in the USA where the share of the public expenditures in gross domestic product for the net public benefits averages 16,1%; for socially significant benefits with inclusion of social transfer payments – 17,9%; for the quasi-public benefits – 5,5%. In Germany during the same peri- od for the pure public benefits was spent 15,1% of gross domestic product; for socially significant benefits (including social transfers) – 25,1%; for actually socially significant benefits – 13,3%; for the quasi-public benefits – 5,8 percent. The similar picture was observed in other industrial countries. These data allow to reveal priorities in realization by the state of productive function in net form: on the first place are socially significant benefits, on the second are net public goods and services, on the third place are quasi-public and other types of the public benefits.

The features of «productive» function of the state…

T a b l e 2 The Share of the Public Expenditures on Production of the Public Benefits

in Gross Domestic Product of the Developed Countries from 1950 to 2015, %

Country Years Total

Net public benefits Social benefits

Quasipublic benefits Man-

agement Defense Order

protection Total Education Health care

Social transfers


1950 1980 1990 2000 2015

24,9 33,5 35,0 35,7 36,5

0,8 1,5 1,6 1,7 1,0

13,1 8,5 6,9 4,7 2,6

0,5 1,3 1,5 1,6 1,4

7,0 18,2 19,0 20,8 24,6

3,2 6,6 6,9 7,2 7,7

0,5 1,5 1,6 1,9 2,3

3,2 10,1 10,5 10,7 14,6

3,5 4,0 6,0 6,9 6,9

Germany 1950 1980 1990 2000 2015

28,4 42,4 42,9 42,9 42,8

1,9 3,2 3,2 3,5 2,6

4,3 4,4 4,2 4,0 2,5

1,4 2,4 2,6 2,7 2,5

18,4 25,6 26,5 27,1 27,7

2,7 4,8 5,1 5,4 5,7

3,5 6,8 7,1 7,2 7,5

12,2 14,0 14,1 14,5 14,5

2,4 6,8 6,7 5,6 7,5


1950 1980 1990 2000 2015

31,4 45,3 47,2 47,5 45,5

2,0 2,8 3,5 3,3 2,5

7,8 5,0 5,7 4,7 3,0

0,8 1,7 1,3 1,4 1,3

19,6 32,6 33,5 34,3 34,8

4,7 8,3 8,7 8,7 8,8

2,4 4,4 4,8 5,1 5,6

12,5 19,9 20,0 20,5 20,5

1,2 3,3 3,3 3,8 3,8 Great


1950 1980 1990 2000 2015

32,1 40,6 42,9 43,1 43,4

1,5 1,9 1,9 2,0 1,7

4,6 6,9 6,7 5,7 3,5

1,5 2,5 2,4 2,4 2,3

17,9 22,5 25,6 26,8 29,8

5,1 6,9 6,9 7,0 7,2

5,1 6,9 6,9 7,3 8,1

7,7 8,8 11,9 12,5 14,5

6,4 6,9 6,3 6,1 6,1


1950 1980 1990 2000 2015

22,5 38,1 47,9 49,0 45,5

1,5 2,8 3,7 3,6 2,8

3,0 3,2 3,7 3,2 2,0

1,5 2,8 3,2 3,2 2,8

14,5 24,7 31,8 34,3 33,1

3,5 6,3 7,4 7,2 6,7

3,0 5,1 6,5 6,5 6,5

8,0 13,3 18,0 20,6 19,8

2,0 4,5 5,5 4,8 4,8


1950 1980 1990 2000 2015

13,2 25,0 26,9 27,2 29,7

1,6 1,9 2,1 2,0 1,4

1,1 1,0 1,0 1,0 0,9

1,6 1,9 2,1 2,0 2,0

6,8 16,2 18,4 18,8 21,8

3,2 5,4 5,6 5,6 5,7

0,5 0,6 0,7 0,8 1,2

3,2 10,3 12,0 12,4 14,9

2,1 3,9 3,4 3,3 3,7 Note. Source: It is made by the author on a source [6].

For the Kazakhstan economy are characteristic the same tendencies concerning the directions of realiza- tion by the state of direct productive function, as for the countries with normally functioning mixed economy (it is visible from Table 3).

T a b l e 3 Dynamics of Expenditures of the State Budget of the Republic of Kazakhstan, in 2010-2016, billion tenge

Expenditures 2010 2011 2012 2013 2014 2015 2016

Deflection, 2016 \ 2015 Billion

tenge %

1 2 3 4 5 6 7 8 9 10

The state services of general character

225 296 326 382 484 697 419 -278 60,1

Defense 221 265 241 397 432 454 453 -1 99,8

C o n t i n u a t i o n o f T a b l e 3

1 2 3 4 5 6 7 8 9 10

Public order, safety, legal, judicial, criminal and execu- tive activity

369 448 558 608 601 557 455 -102 81,7

Education 769 987 1210 1237 1359 1365 531 -834 38,9

Health care 551 626 731 795 856 864 790 -74 91,4

Social aid and social security 905 1134 1239 1360 1549 1713 1896 183 110,7 Housing and communal ser-


334 389 439 472 555 443 158 -285 35,7 Culture, sport, tourism and

information environment 228 202 223 258 298 294 116 -178 39,5

Fuel and energy complex and subsurface use

80 112 127 120 129 112 63 -49 56,25 Agriculture, water, forest, the

fishery, especially protected natural territories, environ- mental protection and fauna, the land relations

207 271 293 259 349 376 192 -184 51,1

Industry, architectural, town- planning and construction activity

28 25 26 32 43 62 10 -52 16,1

Transport and communica- tion

391 449 482 511 614 682 560 -122 82,1

Other 68 97 144 243 292 310 1015 705 327,4

Debt services 95 122 131 178 233 297 551 254 185,5

Total 4471 5423 6269 6853 7792 8227 8045 -182 97,8

Note. Source: It is made by the author on a source [6, 7].

So, priorities are placed as follows in implementation of pure productive function by the domestic state:

other expenditures is on the first place - on the average 13% of gross domestic product. Debt services averag- ing 6,8 percent from gross domestic product is on the second place. At last, the social aid and social security by the state, averaging 2,3 percent from gross domestic product is on the third place.

The sphere of the pure public benefits approximately corresponds to minimum possible scales of im- plementation of direct productive function by the state, and the sphere of the mixed public benefits gives an idea of admissible limits of its interventionism, being the arena of cooperation and the competition to the private sector [8]. In the second situation is admissible and expedient statement of a question of minimization of the state participation in creation and financing of the mixed public benefits. If property of non excludabil- ity is shown, it makes sense to consider possibilities of use of market mechanisms and a private initiative. If borders of not rivalry are rather narrow, the state production of the mixed public benefits should be focused mainly on local levels and to use mechanisms of voluntary collective actions.

V. Conclusions

In all countries the public sector is a dual, inconsistent institutional formation. It personifies two begin- nings: the market – based on equivalence of an exchange, onerousness, property right alienation, purchase and sale, and non-market – based on nonequivalence, gratuitousness, the uncertain specification of the prop- erty rights, non-market mechanisms of distribution of resources. The duality of the economic nature of public sector is a source of inefficient use of economic resources. This dualism in production of the public benefits causes the necessity of effective legislative regulation of this sector for the purpose of providing conditions for rationalization of use of economic resources in creation of such benefits.

The state carries out productive function in the pure and mediated forms. Dominating economic effect in its realization is direct production of net public, socially significant, quasi public and private benefits with- in public sector of economy.