Public finance is a special field of economics. It is concerned with the theory and policy of the public sector and its interrelations with the private sector. It analyzes the economic role of the state from a normative as well as from a positive perspective. The normative view examines efficiency- and equity-oriented motives for governmental intervention and develops fiscal policy guidelines. The positive view explains the actual behavior of economic agents in the public sector. Special fields of Public Finance are public revenues, i.e. taxes and public debt, expenditures for publicly provided goods and social security systems.
Modern public management examines the characteristics of public administration from an incentive-oriented point of view. It applies the analytic instruments developed in the public choice and contract theory literature to the specific incentive mechanism of public administration, thereby combining financial and economic explanatory approaches. The main question is how to harness the incentive mechanisms developed in the context of corporate governance, for the public authorities, which are influenced by the public decision-making process and the specific conditions of the use of the budget, which is rather rule-based than result-oriented.