Abstract. The task of finding effective forms and instruments of financial policy that ensure sustainable technological growth of the economy is currently facing all developed and developing countries. However, finance was not usually considered as a key factor of a progress. The analysis showed that a new approach to the stock market is currently needed, which should ensure the redistribution of profits in the interests of society, that is, in favor of the results from state investments in science and intellectual property, but not venture capital, as well as the adjustment of patent regulation. The task was set to create private-state investment funds focused on a technological breakthrough, primarily on the construction of specialized infrastructure. Finally, the paper notes that the solution of these problems is possible only through the tools of digital financial instruments.

Key words - private investment funds, technological portfolios of intellectual rights, financial modeling. 

Introduction. History provides an example of the three most effective models for responding to technological challenges that countries have faced. The first is a kind of reaction to the “Sputnik moment” in the United States. The author and organizer of the implementation of the concept of an innovative triangle of government, industry and academia was Professor Vannevar Bush, who convinced President Roosevelt to switch to contracting with universities and private contractors instead of creating large state laboratories. The Department of Defense soon became the main sponsor of much of America's basic research. By 1965, 23% of federal government funding for university science came from the Pentagon – nearly twice as much as from the National Science Foundation. It would not be an exaggeration to say that the creation of the “innovation triangle”, as a special form of triangular relations between government, industry and science, was in itself the most important of the innovations that contributed to the technological revolution of the second half of the 20th century.

The second model is the “knowledge triangle” (education-research-innovation) that has been emphasized by the European Council at every Lisbon Strategy Summit since 2006.

Finally, the third in the 1990s is Henry Etzkowitz (USA) and Loet Leydesdorff (Netherlands) “triple helix: enterprises-universities-government”, as a result of which in most countries, as in Georgia, there has been a shift in emphasis from scientific organizations to universities.

An analysis of the current situation with the active use of hybrid forms of interaction and communication networks, as well as artificial intelligence, led to the conclusion that a new key triangle of a technological breakthrough should includethe interaction of “science - production - as well as private and public financial instruments of the highest level of complexity”, that is, the entire range of the modern stock market.

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So far, innovation has intersected with the stock market mainly in the relatively narrow field of venture capital. Moreover, a unique situation has arisen here: in cases where public funds have made initial risky investments (and private venturecapital enters the process only at the moment when its investment is largely guaranteed), these public funds should be adequately compensated for their fearlessness[1]. In reality, the opposite happens. In such cases, the share of private venture companies in profits is about 20%, excluding other commissions and fees; on the contrary, the direct share of the public sector is close to zero. It is believed that the public sector will receive its reward in other, mostly indirect ways: through taxation or benefits from products with high quality and low costs. Such an approach not only completely ignores the principled and risky first-step investments made by public funds in the innovation process, it also gives disproportionate privileges in the distribution of rewards to private investors who come at a later stage.

In our opinion, the main profits from fundamental investments in science should be accumulated and directed to society, and such tools can be developed and implemented only through specialized financial instruments.

We suggest using intellectual property (IP) private investment funds, including mutual funds and ETF for this purpose. Success in this area largely depends on improving the mechanisms of bank lending secured by intellectual property rights, government’s subsidizing the evaluation of IP and building a system for selling such collateral as a high-quality asset through a digital exchange of technological portfolios of intellectual property rights. An important step in the development of a mechanism for evaluating IP objects should be the creation of a special Center and the adoption of a state evaluation standard, as well as the reasonable application of the “patent box” regime (rewards for organizations on income tax from IP), and finally, the elimination of regulatory barriers.

It should be noted that important imbalances must be eliminated within the patent system. Today, the patent “deal” is so unbalanced that the system no longer supports the innovation economy, but slows it down, in particular when large companies use “strategic” patenting in related fields, counting on blocking the actions of competitors[2]. As an example, we can also cite the mechanism of the “patent box”[3] to reduce taxes on any product with proprietary components. Lobbyists pushed through this policy, even though its main effect was to reduce government revenue rather than increase the type of investment that would have led to patents in the first place[4]. Economists are often caught up in the market efficiency narrative to wonder whether these returns are really justly earned profits or simply rents. The reason for this problem lies precisely in the fact that no distinction is made between profits and rents. Legislative changes to the wasteful use of patents could help stimulate the innovation process rather than stifle it.

In contrast to the financial sector, in respect of which every effort was made to present it as productive, in relation to the state, quite the opposite happened. The fact that, according to the adopted system of national accounts, public spending is higher than the value it adds, has led to the misconception that the state is “unproductive”. However, as Robert Solow (the Nobel Memorial Prize in Economic Sciences in 1987) demonstrated, most of the achievements in the manufacturing sector of the first half of the 20th century can be attributed not to labor and capital, but to the collective efforts of society and the state. This is not only about improvements in education and infrastructure, but also about radical technological changes, in which the public sector - the “entrepreneurial state” has historically played a leading role.

After the financial crash of 2008—a crisis driven largely by private rather than public debt—governments saved the economic system from collapse. Not only have the US and EU pumped trillions of dollars and euros into the financial system through quantitative easing (QE) schemes, they have taken private assets into their books.

Throughout modern history, the social nature of risks has not been accompanied by appropriate rewards. Today, a financial system must be created in which the state will receive a return on its successful investments in order to finance the next investment cycle. This can be done in a variety of ways – through shares in the capital, setting conditions for the reinvestment of profits or price restrictions, etc.

Additionally, modern financial instruments should provide:

• institutional “linking”, that is, a change in the previous key model of interaction between scientific and industrial components;
• focus on megaprojects and consortiums;
• creating conditions for small technology companies, developing special mechanisms for their investment financing, including crowd platforms and the institution of business angels, endowment funds, etc.

One of the most effective areas of government activity should be the introduction into circulation and regulation of new digital instruments - digital utility rights (DUR) and digital financial assets (DFA).

We are talking about the possibility of digitalization (tokenization) of traditional financial instruments, including bonds of state and regional loans and other financial instruments. State regulators need to work out the possibility of issuing instruments in the form of digital rights, such as non-equity securities, debt of third parties (issuance and transfer of DFA, certifying the rights of claims against the issuer, secured by debt of third parties), loans and claims secured by mortgages (digital securitization), tokenized precious metals and stones (“hybrid” digital rights) and “title” NFT[5].

At the same time, national regulatory changes should affect the following aspects:

• taxation of digital rights;
• circulation of digital rights within the traditional market infrastructure;
• regulatory arbitrage issues between digital rights and traditional financial instruments;
• issues of circulation of digital rights issued in accordance with foreign legislation;
• regulation of the use of smart contracts.

The new model of financial organization is decentralized finance (DeFi)., in which there are no intermediaries, transactions are carried out automatically using smart contracts that are executed on the basis of distributed ledger technology (DLT), and users have direct control over their assets

DeFi is based on the decentralized principle of storage and control of crypto assets. The nature of crypto-assets can have such DLT-based digital tokenized solutions as digital financial assets backed by stablecoins. Crypto assets use encryption-based cryptographic methods to protect data from unauthorized access and modification, which are already widely used outside the financial sphere. Going forward, DeFi also has the potential to use central bank digital currencies (CBDCs) and tokenized non-cash currencies, which can be projected on various technologies. DeFi tools allow you to make transactions that are economic content similar to lending, insurance, asset management, and other transactions using crypto assets. DeFi is a form of financial organization that allows you to provide and receive traditional financial services on a different technological basis, they transform the usual infrastructure and interface of traditional finance. So far, DeFi has a small share in the global financial market, but this area has the potential for rapid growth. At the same time, DeFi has no country borders.

Most effectively, all the proposed measures of financial modeling can be implemented in the field of environmental development. The development of a scientifically based system for evaluating the effectiveness of environmental and climate risk management technologies to ensure the sustainable development of territories, coastal waters and urban agglomerations is impossible without the use of the most modern financial models. In particular, digital financial instruments and rights should ensure the operation of the Greenhouse Gas Inventory, greenhouse gas emission registers, climate projects, the international registry and exchange of carbon units, etc. Only this approach will ensure the necessary level of monitoring and modeling of climate and environmental changes, the development of adaptation mechanisms and development of measures to mitigate their anthropogenic impact.

As a first practical step, we propose to use the mechanism of private Real Estate Investment Funds (REIT), which invest in infrastructure projects, including technology parks, modern wireless networks, data centers, carbon polygons and other innovation support groups. 

Conclusions:

1. Until the 1960s, finance was not considered a “productive” part of the economy. They were seen as an important tool for moving existing wealth, rather than creating new one. Economists' calculations of gross domestic product (GDP) included finance only as an “intermediate factor” - a service necessary for the functioning of other industries, which were the real creators of value.
2. Around 1970, this state of affairs began to change. The system of national accounts, which provide a statistical picture of the size, composition and direction of an economy, began to include the financial sector in the calculation of GDP as the total value of goods and services produced in this economy[6]. This change in calculations coincided with the deregulation of the financial sector. The financial industry has openly lobbied to advance its interests, claiming that finance plays a critical role in creating wealth, and here it was first and foremost about more intermediaries involved in wealth management (the asset management industry and venture capital).
3. At the same time, the public sector began to appear unproductive. Modern economic thought mistakenly reduced the role of the state only to correcting market failures instead of forming and profiling it.

Most fully such activities can be implemented today just in the field of digitization (tokenization) of traditional financial instruments: digital utility rights (DUR), digital financial assets (DFA) and decentralized finance.

1. In general, the country should solve the problem of creating a platform model for managing technological development, including appropriate financial instruments, based on reliable data and artificial intelligence, with a focus on large advanced countries in order to “complement each other in high-tech industries”.
2. The creation of private investment funds for the construction of scientific and technology parks, as well as for the purchase of technological portfolios of intellectual rights (IP) and shares of high-tech companies is possible only with active assistance and co-financing from the government, which is the main missing element of financial modeling necessary for a technological breakthrough in modern countries, including in Georgia.

A promising testing ground for developing such a systemic financial model is environmental development. 

References

1. Albright Stonebridge Group (ASG). Strategic Technology Landscape 2023 - Risks, Opportunities, and Wild Cards - https://www.albrightstonebridge.com/files/Strategic%20Technology%20Landscape%202023%20-%20Risks,%20Opportunities,%20and%20Wild%20Cards_0.pdf
2. Andy Royce. Understanding Patent Box tax relief, 27 January 2023 - https://kene.partners/insights/patent-box-explained/
3. Investment funds EU actions have not yet created a true single market benefiting investors - Special report 04/2022 https://www.eca.europa.eu/EN/publications/SR22_04
4. James W. Phillips' Newsletter. Securing Liberal Democratic Control of AGI through UK Leadership, 2023 - https://jameswphillips.substack.com/p/securing-liberal-democratic-control
5. Replies of the EUIPO 2022 - https://www.eca.europa.eu/en/Pages/DocItem.aspx?did=61056
6. The Sixth Assessment Report (AR6) of the United Nations (UN) Intergovernmental Panel on Climate Change (IPCC). March 2023- https://www.ipcc.ch/