The document reviews theories of public expenditure and public revenue. It discusses Wagner's law which states that government expenditure rises with economic development. Musgrave expanded on this, noting expenditure increases to develop infrastructure early on but may decrease later. Peacock and Wiseman proposed public spending increases in "jerks" due to disturbances. The document also examines theories of public revenue sources, including Dalton's classification of taxes versus prices and Taylor's categories of grants, administrative revenues, commercial revenues, and taxes.
The principle of maximum social advantage holds that governments should maximize social benefits from resources and balance social costs of taxation with social benefits of public spending. Specifically:
1) Governments should determine optimal levels of taxation and spending by comparing how additional tax burdens citizens and how additional public funds benefit society.
2) Both taxes and expenditures should be carried out only up to the point where further increases provide diminishing returns to citizens.
3) Resources should be allocated across different public uses and tax sources in a way that minimizes total social sacrifices.
Public economics unit 3 public expenditure and public debtNishali Balasingh
This document provides an overview of public economics, specifically public expenditure and public debt. It defines key terms like public expenditure, importance and objectives of public expenditure, classification of public expenditure, reasons for its growth, canons of public expenditure, and hypotheses about its growth like Wagner's law. It also defines public debt, causes and classification of debt, debt burden and its measurement. It concludes with discussing redemption of public debt.
1. Public finance involves the study of government spending, taxation, and deficits. It examines when and how governments should intervene in markets and the potential outcomes of policy changes.
2. Understanding how government actions affect the economy is important for public finance professionals. Government interventions aim to improve economic efficiency, distribute income, and stabilize macroeconomic conditions.
3. The scope of public finance includes analyzing public revenue, expenditure, debt, financial administration, and economic stabilization policies. It also involves allocating public goods, redistributing income, and reducing economic fluctuations through fiscal policy tools.
This document summarizes Wagner's hypothesis and the Peacock-Wiseman hypothesis about public expenditure. Wagner hypothesized that industrialization leads to increasing state activity and that public expenditure will rise faster than per capita income. The Peacock-Wiseman hypothesis emphasizes time patterns of spending rather than a theory of growth. It involves displacement effects as social disturbances expand the public sector, inspection effects as revenue lags required spending, and concentration effects as central government activity increases with economic growth. The document also lists criticisms of Wagner's hypothesis and defines intensive and extensive increases in state activity.
This document provides an introduction and overview of public finance. It defines public finance as dealing with the income and expenditure of public authorities and the adjustment of one to the other. The document outlines the meaning, scope, divisions, and need for public finance. Specifically, it discusses how public finance includes the study of public revenue, expenditure, debt, and financial administration. It also examines how public finance aims to achieve objectives like economic growth, distribution of wealth, and stability.
The Peacock-Wiseman Hypothesis proposes that government spending evolves in a step-like pattern coinciding with social upheavals like wars. It involves three related elements: 1) The displacement effect, where spending increases during disturbances, raising taxes and the budget. 2) The inspection effect, where increased spending leads to reviewing revenue needs. 3) The concentration effect, where spending and revenue stabilize at a new higher level until the next disturbance causes another displacement effect. Along with these effects, it explains the concept of a tolerance level of taxation that a population is willing to tolerate.
The Big Push Theory proposes that developing countries require a minimum threshold of investment across multiple industries to overcome issues of indivisibilities and break out of poverty. It identifies three types of indivisibilities: in production due to infrastructure needs, in demand due to small markets, and in savings due to high investment requirements. The theory argues for coordinated investment in social overhead capital and multiple industries to realize increasing returns to scale. However, it has been criticized for not providing clear guidance and overlooking constraints faced by developing countries.
MEANING
MEANING
DEFINITION
CLASSIFICATION OF PUBLIC EXPENDITURE
CAUSES FOR THE GROWTH OF PUBLIC EXPENDITURE
MEANING
DEFINITION
CLASSIFICATION OF PUBLIC EXPENDITURE
CAUSES FOR THE GROWTH OF PUBLIC EXPENDITURE
The principle of maximum social advantage holds that governments should maximize social benefits from resources and balance social costs of taxation with social benefits of public spending. Specifically:
1) Governments should determine optimal levels of taxation and spending by comparing how additional tax burdens citizens and how additional public funds benefit society.
2) Both taxes and expenditures should be carried out only up to the point where further increases provide diminishing returns to citizens.
3) Resources should be allocated across different public uses and tax sources in a way that minimizes total social sacrifices.
Public economics unit 3 public expenditure and public debtNishali Balasingh
This document provides an overview of public economics, specifically public expenditure and public debt. It defines key terms like public expenditure, importance and objectives of public expenditure, classification of public expenditure, reasons for its growth, canons of public expenditure, and hypotheses about its growth like Wagner's law. It also defines public debt, causes and classification of debt, debt burden and its measurement. It concludes with discussing redemption of public debt.
1. Public finance involves the study of government spending, taxation, and deficits. It examines when and how governments should intervene in markets and the potential outcomes of policy changes.
2. Understanding how government actions affect the economy is important for public finance professionals. Government interventions aim to improve economic efficiency, distribute income, and stabilize macroeconomic conditions.
3. The scope of public finance includes analyzing public revenue, expenditure, debt, financial administration, and economic stabilization policies. It also involves allocating public goods, redistributing income, and reducing economic fluctuations through fiscal policy tools.
This document summarizes Wagner's hypothesis and the Peacock-Wiseman hypothesis about public expenditure. Wagner hypothesized that industrialization leads to increasing state activity and that public expenditure will rise faster than per capita income. The Peacock-Wiseman hypothesis emphasizes time patterns of spending rather than a theory of growth. It involves displacement effects as social disturbances expand the public sector, inspection effects as revenue lags required spending, and concentration effects as central government activity increases with economic growth. The document also lists criticisms of Wagner's hypothesis and defines intensive and extensive increases in state activity.
This document provides an introduction and overview of public finance. It defines public finance as dealing with the income and expenditure of public authorities and the adjustment of one to the other. The document outlines the meaning, scope, divisions, and need for public finance. Specifically, it discusses how public finance includes the study of public revenue, expenditure, debt, and financial administration. It also examines how public finance aims to achieve objectives like economic growth, distribution of wealth, and stability.
The Peacock-Wiseman Hypothesis proposes that government spending evolves in a step-like pattern coinciding with social upheavals like wars. It involves three related elements: 1) The displacement effect, where spending increases during disturbances, raising taxes and the budget. 2) The inspection effect, where increased spending leads to reviewing revenue needs. 3) The concentration effect, where spending and revenue stabilize at a new higher level until the next disturbance causes another displacement effect. Along with these effects, it explains the concept of a tolerance level of taxation that a population is willing to tolerate.
The Big Push Theory proposes that developing countries require a minimum threshold of investment across multiple industries to overcome issues of indivisibilities and break out of poverty. It identifies three types of indivisibilities: in production due to infrastructure needs, in demand due to small markets, and in savings due to high investment requirements. The theory argues for coordinated investment in social overhead capital and multiple industries to realize increasing returns to scale. However, it has been criticized for not providing clear guidance and overlooking constraints faced by developing countries.
MEANING
MEANING
DEFINITION
CLASSIFICATION OF PUBLIC EXPENDITURE
CAUSES FOR THE GROWTH OF PUBLIC EXPENDITURE
MEANING
DEFINITION
CLASSIFICATION OF PUBLIC EXPENDITURE
CAUSES FOR THE GROWTH OF PUBLIC EXPENDITURE
In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied.
The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.
Kaldor and Hicks developed the compensation principle to evaluate changes in social welfare resulting from economic changes that help some and harm others. Their principle states that if those who gain can compensate the losers and still be better off, the change increases social welfare. They used utility possibility curves to illustrate this, showing how compensation could move individuals to a higher indifference curve. Their theory was criticized for requiring interpersonal utility comparisons and assuming compensation actually occurs.
The document summarizes the relative income hypothesis proposed by Dusenberry in 1949. The key points are:
1) Dusenberry argued that consumption depends more on a person's relative income position compared to others in their community, rather than their absolute income level. People will consume more if they live in wealthier communities to maintain their standard of living.
2) In the short run, the average propensity to consume is greater than the marginal propensity to consume and the relationship between income and consumption is not proportional. In the long run, consumption increases proportionally with income and the average propensity to consume equals the marginal propensity to consume.
3) Dusenberry also believed consumption
Deficit financing is when a government finances its budgetary deficit through borrowing or increasing the money supply. In India it refers to expenditures exceeding current revenues, with public borrowing to cover the difference. The main types of deficits are the budget, revenue, fiscal, and primary deficits. Fiscal deficits in India have increased substantially over time, from 23 billion rupees in 1974-75 to over 5 trillion rupees in 2012-13. Deficit financing can be used to remedy economic issues but comes with adverse effects like inflation, reduced savings and investment, and higher production costs.
Public goods are characterized by non-excludability and non-rivalry. They cause market failure because the private sector cannot exclude non-payers or protect property rights. Examples include national defense, flood control, and street lighting. Quasi-public goods share some characteristics but can be made semi-excludable or semi-rival through congestion. While the private sector does not normally provide pure public goods, governments must determine optimal provision levels, though new technologies are blurring distinctions with private goods.
The Bergson social welfare function was introduced to provide a scientifically normative study of welfare economics. It defines social welfare as a function of the welfare of each member of the community, depending on factors like their consumption and services. The function establishes a relation between social welfare (W) and the utility levels (U) of each individual (U1, U2, etc.), representing social welfare as an increasing function of individual utilities. It assumes social welfare depends on individual wealth/income and distribution of welfare, and allows for interpersonal comparisons of utility. However, the concept has been criticized for not applying to all governments, being difficult to construct, arbitrary, and not empirically significant or helpful for solving problems.
The document discusses the principle of maximum social advantage proposed by British economist Hugh Dalton. According to this principle, the optimal level of government fiscal activities is the point where marginal social benefits from public spending equals marginal social costs of taxation. This maximizes social welfare. The document explains this using diagrams showing marginal social benefit and marginal social sacrifice curves, with their point of intersection indicating maximum social advantage. It assumes taxes impose costs and spending provides benefits, with both subject to diminishing returns.
The theory of balanced growth proposes that simultaneous investments should be made across multiple industries in order to spur economic development. This would enlarge the market and incentivize more investment. Theorists like Lewis, Ghosh, Ragnar, and List discussed balanced growth in terms of maintaining balance between industry and agriculture, consumption and investment, and domestic versus foreign trade. Balanced growth is argued to promote inclusive, balanced regional development through specialization and creation of infrastructure, but critics note the challenges of coordinated planning and resource constraints in developing countries.
This document discusses public goods and economics concepts. It begins by defining public goods as non-excludable and non-rivalrous goods. The government provides various public goods like roads, parks, and utilities.
Public goods have three key characteristics - non-divisibility meaning they benefit all, non-rivalry meaning one's consumption does not reduce availability to others, and non-exclusivity meaning it is difficult to exclude non-payers. There are also subclasses of public goods discussed like congestible public goods and club goods.
The free rider problem is explained, where individuals may not pay for a public good hoping others will pay instead. Cost-benefit analysis and the principle of maximum social advantage are also
The document discusses four key functions of public finance: allocation, distribution, stabilization, and growth. It also discusses principles for evaluating a good tax system, including revenue adequacy, stability, simplicity, tax neutrality, economic efficiency, and low administration and compliance costs. The document compares tax systems before and after reforms, noting the need to tailor reforms to a country's existing economic system and administrative capabilities.
Public expenditure refers to spending by central, state, and local governments. It can be classified in several ways: by function (defense, welfare); as revenue/capital; transfer/non-transfer; and productive/unproductive. Transfer expenditures like pensions provide benefits without returns, while non-transfer expenditures like infrastructure create outputs. Factors driving higher public spending include increased population and government functions, rising prices and costs, greater national wealth and tax revenue, and expanded social and development programs.
The document provides an overview of public debt including its definition, history, types and trends in developing countries. It discusses how the role of governments has increased over time leading to rising public debt levels. Developing countries in particular have experienced growing debt burdens due to factors like budget deficits, economic crises, and infrastructure development needs. Prudent management of public debt is important to control costs and risks. The objectives of debt management include meeting government borrowing needs at minimum cost while developing domestic capital markets.
Supply-side economics believes that high tax rates in the 1970s slowed economic growth. Supply-siders argue that lowering tax rates will increase incentives to work, save, and invest, leading to higher output and tax revenues in the long run. However, the relationship between tax rates and revenues depicted by the Laffer curve is uncertain, as it is difficult to know the precise tax rate that maximizes revenue. Additionally, the impact of tax changes depends on the time horizon considered, as adjustments to incentives take time.
The document summarizes Kuznets' hypothesis that income inequality within countries initially rises and then falls with economic development. It provides evidence from Kuznets' 1955 study showing higher inequality in less developed countries (LDCs) like India compared to developed countries (DCs) like the UK and US. Kuznets attributed the inverted-U shape relationship between development and inequality to structural changes in early industrialization benefiting high-income groups before policies and social changes in later stages reduced the gap. The document also discusses measures of inequality like the Gini coefficient and debates around Kuznets' hypothesis.
The document discusses government budgets, deficits, and deficit financing. It defines different types of budgets - revenue and capital - and budget receipts and expenditures. It then defines and explains different types of deficits a government can run, including revenue, capital, fiscal, primary, effective revenue, and monetary deficits. It concludes by outlining the typical priority sources for deficit financing: external aid, grants, borrowings, internal borrowings, and printing currency as a last resort.
This document provides an overview of public budgets. It begins by defining what a budget is, including that it is a formal estimate of required resources for a given time period. It then discusses different definitions of budgets provided by various scholars. The document outlines the key components of a budget as public expenditures and public revenues. It also discusses different types of budgets, including operating and development budgets. The document further examines classifications of public expenditures by categories, sectors, general objects, and programs/activities. Finally, it introduces the concept of the canon of public expenditures as rules or principles that governments must follow when incurring expenditures.
Public finance deals with the government's role in the economy and how it raises and spends resources. It is concerned with the income and expenditures of public authorities and adjusting one to the other. Public finance aims to achieve efficient allocation of resources, income distribution, macroeconomic stabilization, steady economic growth, price stability, and balanced development through fiscal tools like taxes, spending, and debt.
Lecture on public finance ( abridged version)Regmi Milan
The document summarizes several lectures on public finance:
1. The first lecture introduced students to the course and provided an overview of public finance concepts like expenditure, revenue, deficit, and the roles of foreign aid, borrowing, and monetary policy.
2. The second lecture discussed a student field visit experience to relate practical planning, budgeting, monitoring, and evaluation skills to the subject.
3. Subsequent lectures covered topics like public versus private goods, the role of government in the Great Depression, theories of public expenditure, canons of public expenditure, and Wagner's Law and the Wiseman-Peacock hypothesis about increasing public activities over time.
Lecture on public finance ( abridged version)Regmi Milan
The document summarizes several lectures on public finance:
1. The first lecture introduced students to the course and provided an overview of public finance concepts like expenditure, revenue, deficit, and the role of the central bank.
2. The second lecture discussed a student field visit experience to relate it to public finance topics like planning, budgeting, monitoring, and evaluation.
3. Wagner's law and the Wiseman-Peacock hypothesis were introduced to explain the tendency of increasing public expenditure over time due to factors like expanding traditional state functions and responding to social disturbances.
4. Several canons of public expenditure were outlined, emphasizing judicious and beneficial use of funds.
In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied.
The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.
Kaldor and Hicks developed the compensation principle to evaluate changes in social welfare resulting from economic changes that help some and harm others. Their principle states that if those who gain can compensate the losers and still be better off, the change increases social welfare. They used utility possibility curves to illustrate this, showing how compensation could move individuals to a higher indifference curve. Their theory was criticized for requiring interpersonal utility comparisons and assuming compensation actually occurs.
The document summarizes the relative income hypothesis proposed by Dusenberry in 1949. The key points are:
1) Dusenberry argued that consumption depends more on a person's relative income position compared to others in their community, rather than their absolute income level. People will consume more if they live in wealthier communities to maintain their standard of living.
2) In the short run, the average propensity to consume is greater than the marginal propensity to consume and the relationship between income and consumption is not proportional. In the long run, consumption increases proportionally with income and the average propensity to consume equals the marginal propensity to consume.
3) Dusenberry also believed consumption
Deficit financing is when a government finances its budgetary deficit through borrowing or increasing the money supply. In India it refers to expenditures exceeding current revenues, with public borrowing to cover the difference. The main types of deficits are the budget, revenue, fiscal, and primary deficits. Fiscal deficits in India have increased substantially over time, from 23 billion rupees in 1974-75 to over 5 trillion rupees in 2012-13. Deficit financing can be used to remedy economic issues but comes with adverse effects like inflation, reduced savings and investment, and higher production costs.
Public goods are characterized by non-excludability and non-rivalry. They cause market failure because the private sector cannot exclude non-payers or protect property rights. Examples include national defense, flood control, and street lighting. Quasi-public goods share some characteristics but can be made semi-excludable or semi-rival through congestion. While the private sector does not normally provide pure public goods, governments must determine optimal provision levels, though new technologies are blurring distinctions with private goods.
The Bergson social welfare function was introduced to provide a scientifically normative study of welfare economics. It defines social welfare as a function of the welfare of each member of the community, depending on factors like their consumption and services. The function establishes a relation between social welfare (W) and the utility levels (U) of each individual (U1, U2, etc.), representing social welfare as an increasing function of individual utilities. It assumes social welfare depends on individual wealth/income and distribution of welfare, and allows for interpersonal comparisons of utility. However, the concept has been criticized for not applying to all governments, being difficult to construct, arbitrary, and not empirically significant or helpful for solving problems.
The document discusses the principle of maximum social advantage proposed by British economist Hugh Dalton. According to this principle, the optimal level of government fiscal activities is the point where marginal social benefits from public spending equals marginal social costs of taxation. This maximizes social welfare. The document explains this using diagrams showing marginal social benefit and marginal social sacrifice curves, with their point of intersection indicating maximum social advantage. It assumes taxes impose costs and spending provides benefits, with both subject to diminishing returns.
The theory of balanced growth proposes that simultaneous investments should be made across multiple industries in order to spur economic development. This would enlarge the market and incentivize more investment. Theorists like Lewis, Ghosh, Ragnar, and List discussed balanced growth in terms of maintaining balance between industry and agriculture, consumption and investment, and domestic versus foreign trade. Balanced growth is argued to promote inclusive, balanced regional development through specialization and creation of infrastructure, but critics note the challenges of coordinated planning and resource constraints in developing countries.
This document discusses public goods and economics concepts. It begins by defining public goods as non-excludable and non-rivalrous goods. The government provides various public goods like roads, parks, and utilities.
Public goods have three key characteristics - non-divisibility meaning they benefit all, non-rivalry meaning one's consumption does not reduce availability to others, and non-exclusivity meaning it is difficult to exclude non-payers. There are also subclasses of public goods discussed like congestible public goods and club goods.
The free rider problem is explained, where individuals may not pay for a public good hoping others will pay instead. Cost-benefit analysis and the principle of maximum social advantage are also
The document discusses four key functions of public finance: allocation, distribution, stabilization, and growth. It also discusses principles for evaluating a good tax system, including revenue adequacy, stability, simplicity, tax neutrality, economic efficiency, and low administration and compliance costs. The document compares tax systems before and after reforms, noting the need to tailor reforms to a country's existing economic system and administrative capabilities.
Public expenditure refers to spending by central, state, and local governments. It can be classified in several ways: by function (defense, welfare); as revenue/capital; transfer/non-transfer; and productive/unproductive. Transfer expenditures like pensions provide benefits without returns, while non-transfer expenditures like infrastructure create outputs. Factors driving higher public spending include increased population and government functions, rising prices and costs, greater national wealth and tax revenue, and expanded social and development programs.
The document provides an overview of public debt including its definition, history, types and trends in developing countries. It discusses how the role of governments has increased over time leading to rising public debt levels. Developing countries in particular have experienced growing debt burdens due to factors like budget deficits, economic crises, and infrastructure development needs. Prudent management of public debt is important to control costs and risks. The objectives of debt management include meeting government borrowing needs at minimum cost while developing domestic capital markets.
Supply-side economics believes that high tax rates in the 1970s slowed economic growth. Supply-siders argue that lowering tax rates will increase incentives to work, save, and invest, leading to higher output and tax revenues in the long run. However, the relationship between tax rates and revenues depicted by the Laffer curve is uncertain, as it is difficult to know the precise tax rate that maximizes revenue. Additionally, the impact of tax changes depends on the time horizon considered, as adjustments to incentives take time.
The document summarizes Kuznets' hypothesis that income inequality within countries initially rises and then falls with economic development. It provides evidence from Kuznets' 1955 study showing higher inequality in less developed countries (LDCs) like India compared to developed countries (DCs) like the UK and US. Kuznets attributed the inverted-U shape relationship between development and inequality to structural changes in early industrialization benefiting high-income groups before policies and social changes in later stages reduced the gap. The document also discusses measures of inequality like the Gini coefficient and debates around Kuznets' hypothesis.
The document discusses government budgets, deficits, and deficit financing. It defines different types of budgets - revenue and capital - and budget receipts and expenditures. It then defines and explains different types of deficits a government can run, including revenue, capital, fiscal, primary, effective revenue, and monetary deficits. It concludes by outlining the typical priority sources for deficit financing: external aid, grants, borrowings, internal borrowings, and printing currency as a last resort.
This document provides an overview of public budgets. It begins by defining what a budget is, including that it is a formal estimate of required resources for a given time period. It then discusses different definitions of budgets provided by various scholars. The document outlines the key components of a budget as public expenditures and public revenues. It also discusses different types of budgets, including operating and development budgets. The document further examines classifications of public expenditures by categories, sectors, general objects, and programs/activities. Finally, it introduces the concept of the canon of public expenditures as rules or principles that governments must follow when incurring expenditures.
Public finance deals with the government's role in the economy and how it raises and spends resources. It is concerned with the income and expenditures of public authorities and adjusting one to the other. Public finance aims to achieve efficient allocation of resources, income distribution, macroeconomic stabilization, steady economic growth, price stability, and balanced development through fiscal tools like taxes, spending, and debt.
Lecture on public finance ( abridged version)Regmi Milan
The document summarizes several lectures on public finance:
1. The first lecture introduced students to the course and provided an overview of public finance concepts like expenditure, revenue, deficit, and the roles of foreign aid, borrowing, and monetary policy.
2. The second lecture discussed a student field visit experience to relate practical planning, budgeting, monitoring, and evaluation skills to the subject.
3. Subsequent lectures covered topics like public versus private goods, the role of government in the Great Depression, theories of public expenditure, canons of public expenditure, and Wagner's Law and the Wiseman-Peacock hypothesis about increasing public activities over time.
Lecture on public finance ( abridged version)Regmi Milan
The document summarizes several lectures on public finance:
1. The first lecture introduced students to the course and provided an overview of public finance concepts like expenditure, revenue, deficit, and the role of the central bank.
2. The second lecture discussed a student field visit experience to relate it to public finance topics like planning, budgeting, monitoring, and evaluation.
3. Wagner's law and the Wiseman-Peacock hypothesis were introduced to explain the tendency of increasing public expenditure over time due to factors like expanding traditional state functions and responding to social disturbances.
4. Several canons of public expenditure were outlined, emphasizing judicious and beneficial use of funds.
This document provides an overview of public expenditure analysis. It begins by defining public expenditure and explaining the learning outcomes, which are to explain what public expenditure is, the types of public expenditures, and some macro models of public expenditure growth. It then discusses principles of expenditure analysis, including allocation effects, redistribution effects, and stabilization effects. Types of expenditures are classified as exhaustive/transfers and non-marketed/marketed goods. The document also explains discretionary and statutory expenditures in Ghana. Three macro models of expenditure growth are outlined: Wagner's law, development models, and the Peacock-Wiseman model. Causes of growth in developing countries are also discussed.
This document discusses changing perspectives on social security systems. It argues that social security is a fundamental human right recognized globally and provides important societal benefits like reducing poverty and inequality. However, social security systems have come under pressure in recent decades from economic stresses and a paradigm viewing social welfare as a trade-off for economic growth. The document advocates optimizing national social security systems within a framework of decent work and contests the view of an inevitable trade-off between social welfare and economic growth.
1. Neo-liberalism prioritizes private property rights, free markets, and free trade and argues this maximizes human well-being.
2. Under neo-liberalism, the role of the state is limited to maintaining institutional frameworks that support private markets. The state provides services only where markets don't exist.
3. Critics argue neo-liberalism has increased inequality and poverty. It has constrained fiscal and monetary policies and reduced government services, disproportionately impacting the poor.
Public finance deals with the revenues and expenditures of government entities and aims to study how government fiscal policies impact the economy. It encompasses the sources of government income through taxes and other means, how money is spent on public services, how deficits are financed through public debt, and the administration of the public budget. Public finance also plays an important role in promoting economic growth and stability in both developed and developing nations.
This document provides an introduction to public sector finance, outlining specific objectives of understanding sources of government revenue, expenditures, borrowing, budgeting techniques, auditing, and restructuring. It covers definitions of key terms like public sector, public finance, and differences between private and public financial management. The document aims to explain the importance and justification of government intervention in the economy through the public sector.
Public expenditure plays four main roles: contributing to demand, coordinating economic impulses, increasing public goods, and creating positive externalities. It is determined by political priorities and interpretations of the economic situation. Public expenditure impacts GDP and can crowd out private investment. It may behave pro-cyclically or anti-cyclically depending on how governments react to changing revenues during economic downturns by reducing or increasing spending.
Growth of Public Expenditure - Wagner and Wiseman-PeacockRicha270262
The document discusses two laws related to the growth of public expenditure: Wagner's Law of Increasing State Activity and the Wiseman-Peacock Hypothesis. Wagner's Law states that as an economy develops, the activities and functions of the government will increase, leading to higher public expenditure. The Wiseman-Peacock Hypothesis argues that public expenditure does not increase at a steady rate, but rather in jumps in response to economic disturbances. The document then examines factors that have contributed to increased public expenditure in India such as defense spending, population growth, economic development initiatives, and anti-poverty programs.
Public expenditure includes expenses incurred by central, state and local governments. There are several principles or canons that govern public expenditure, including the canon of benefit, which states that spending should confer greatest social benefits. The canon of economy refers to avoiding wasteful spending and ensuring efficiency. Several classifications of public expenditure exist, including distinguishing between revenue/capital and development/non-development expenditures. Public spending can positively impact production, distribution, consumption, and economic stability and growth.
Taxation, Inflation and Public Debt Basic ModelPedroGeyer
In this essay, we present a model of optimal taxation, money creation, and public debt policies chosen by the ruling elite in a society with three social classes: the ruling elite, the middle class, and the poor. The ruling elite seeks to maximise their own utility while preventing rebellion or coups by the other social classes. We also consider the indirect effects of money creation and public debt on wealth redistribution and economic stress. Our results show that the ruling elite will seek to take as much wealth as it can, maintaining the other individuals at the edge of their tolerance. Thus, by providing insights into the trade-offs and incentives facing the ruling elite, this model can help inform policy, political choices, and thought.
This document provides an overview of public finance as a subject area. It defines public finance and outlines its key areas of focus, including public revenue, public expenditure, public debt, financial administration, and economic stabilization. It distinguishes public finance from private finance and discusses some major principles of public finance, including the principle of maximum social advantage. The document is a study material on public finance prepared by the University of Calicut School of Distance Education.
Agricultural Extension and CommunicationKarl Obispo
This document provides an overview of agricultural development and extension. It defines development and discusses various development theories including growth theories, structural theories, stage theory, liberation theory, and advantage theory. It also covers aspects of agricultural development including production, marketing, supply, governance, research, education, and extension. Sustainable agriculture and country experiences are discussed. Finally, it outlines some key Philippine agriculture laws.
This document contains solutions and activities for chapters 1 and 2 of an economics textbook on public finance.
For chapter 1, it provides answers to sample questions about rationales for government intervention in education, changes in government spending over time, and approaches to public financing.
For chapter 2, it presents solutions to problems calculating relative prices, price elasticity of demand, and consumer and producer surplus. It also describes in-class activities for visualizing federal budget allocations and discussing positive vs. normative questions.
FDA Website AssignmentGo to FDA website www.fda.gov1. Unde.docxssuser454af01
FDA Website AssignmentGo to FDA website www.fda.gov1. Under “Laws FDA Enforces”, go to the Federal Food, Drug and Cosmetic Act and read Chapter 2, Definitions, particularly the definition of drugs and devices.2. Write a paper, 500 words, describing A. three things that you as a consumer can learn from the web page andB. three things that you as a part of industry can learn from the web page
Background
Following the finish of the common war and the adjustment of the residential cash by the national bank, the principal compensation change process occurred in 1996, and a novel correction in 2008 allowed a singular amount increment of LBP 200,000 every month for both open and private divisions representatives, conveying the lowest pay permitted by law up to LBP 500,000 from LBP 300,000.1 For the following sixteen years, in any case, there were no wage increments despite the fact that swelling continued rising and achieved a hundred percent and the acquiring energy of the Lebanese individuals began to drop significantly.2
In an examination led by the Lebanese Federation of Consumer Protection, Lebanon was positioned first among 14 Arab nations regarding high costs for meat, sugar, tea, and drain, and it positioned second when it came to tomato, potato, and vegetable oil costs. The investigation credited these outcomes to the nearness of ineffectively aggressive buyer markets (restraining infrastructures), and to the non-implementation of controls identified with settling business benefit margins.3 These variables and others have added to a noteworthy abatement in the offer of wages in the Gross Domestic Product, which a few substances claim to have achieved a low of 30%.4
By mid of 2011, speaks began mounting about the low level of wages that is keeping Lebanese laborers from fulfilling their essential needs in light of rising sustenance costs and the cost of fundamental administrations like power and transportation. In fact, the issue of wages modification wound up noticeably one of the best needs on general society scene over a five-month time frame between September 2011 and January 2012. These discussions were at first supported by a "political open door" that was emerged by the arrangement of another administration in July 2011 and which pronounced putting social equity among its priorities.5 They were likewise convenient on account of the drawing closer of the new scholastic year that involves along the weight of rising school and college educational cost charges.
The procedure began with an exchange among different concerned gatherings, including the Presidency of the Council of Ministers, the Ministry of Labor, monetary bodies, and worker's guilds. Notwithstanding, the level headed discussion swelled into a contention that undermined the solidarity of the administration before coming full circle in the selection of the wage alteration announce No. 7426 amid the January 18, 2012 session of the Lebanese Cabinet.
This area condenses ...
Analysis of Public Investment Expenditure on Economic Growth in WAEMU Countriesinventionjournals
Public investment expenditure plays an important role in the economy to produce goods and services needed for economic development. This study analyzes the influence of public investment spending on the economic growth of the WAEMU zone. The study considers a linear approach through individual fixed effects models with Beck-Katz and Driscoll-Kraay corrections, the spatial autocorrelation model (SAC) and the longterm model (DOLS). The empirical results of the study using panel data covering the period 1990-2015 indicate that public investment spending can promote economic growth in WAEMU countries when they are allocated in decreasing order to Education, health, public investment in basic road infrastructure and agriculture. However, they are also likely to slow it down when they focus on military spending, even though their primary objective is to ensure security for economic development. Finally, the study recommends that policy makers in WAEMU countries refocus their public expenditure policies in key sectors of development, notably human capital, in order to ensure a multiplier effect of public spending on economic growth and strengthen institutions Democracy to ensure their independence through their interdependence.
Analysis of Public Investment Expenditure on Economic Growth in WAEMU Countriesinventionjournals
: Public investment expenditure plays an important role in the economy to produce goods and services needed for economic development. This study analyzes the influence of public investment spending on the economic growth of the WAEMU zone. The study considers a linear approach through individual fixed effects models with Beck-Katz and Driscoll-Kraay corrections, the spatial autocorrelation model (SAC) and the longterm model (DOLS). The empirical results of the study using panel data covering the period 1990-2015 indicate that public investment spending can promote economic growth in WAEMU countries when they are allocated in decreasing order to Education, health, public investment in basic road infrastructure and agriculture. However, they are also likely to slow it down when they focus on military spending, even though their primary objective is to ensure security for economic development. Finally, the study recommends that policy makers in WAEMU countries refocus their public expenditure policies in key sectors of development, notably human capital, in order to ensure a multiplier effect of public spending on economic growth and strengthen institutions Democracy to ensure their independence through their interdependence
This document provides an introduction to public finance and distinguishes it from private finance. It defines public finance as the study of government income and expenditure. Key points include:
- Public finance deals with topics like public revenue (e.g. taxes, non-tax revenue), public expenditure, public debt, financial administration, and economic stabilization.
- Public goods are provided by the government due to their non-rival and non-excludable nature.
- While public and private finance share similarities like balancing income/expenditure, they differ in how expenditure is determined relative to income. The government estimates expenditure needs first before determining revenue sources.
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Review of theories of public expenditure and public revenue
1. REVIEW OF THEORIES OF PUBLIC EXPENDITURE AND PUBLIC REVENUE
1.0 INTRODUCTION
In a democratic setting, public expenditure is an expression of people's will, managed through
political parties and institutions .According to Wikipedia, Public expenditure is spending made by
the government of a country on collective needs and wants such as pension, provisions (such as
education, healthcare and housing), security, infrastructure while Muley (2020) says public
expenditure are Expenses incurred by the public authorities (central, state and local self-
government) in which Such expenditures are made for the maintenance of the governments as well
as for the benefit of the society as whole. Thus, Public expenditure can be summarized as the
expenditure on the developmental and non-developmental activity in a country.
In the 19th century, academic scholars believed public expenditures were wasteful and must be
kept low as far as practicable because the main function of government spending then was on
defense and maintaining law and order, however, this conservative thinking died down in the 20th
century as a result of the second world war which necessitated increase in government participation
in the length and breadth of the economy and this led to emergence of modern state known as
welfare state. Government increases government expenditure in an economy because of the
following reasons:
1. Size of the Country and Population
2. Defense Expenditure
3. Provision of social security benefit
4. Economic Development
5. Price increment
Keynesian economist believe that contraction in the economy is as a result of government deficit
in public spending, hence increased government spending is thought to raise aggregate demand
and increase consumption while classical economist believe that increased government spending
exacerbates economic contraction by shifting resources from the private sector, which they
consider productive, to the public sector, which they consider unproductive.
Many scholars have categorized government expenditure into many forms, however, the following
are the broad areas of government expenditure.
2. 1. Government acquisition of goods and services for current use to directly satisfy individual
or collective needs of the members of the community is classed as government final
consumption expenditure
2. Government acquisition of goods and services intended to create future benefits, such as
infrastructure investment or research spending, is classed as government investment (gross
fixed capital formation), which usually is the largest part of the government gross capital
formation
3. Government expenditures that are not acquisition of goods and services, and instead just
represent transfers of money, such as social security payments, are called transfer
payments.
Government does not spend in isolation just to satisfy budgetary needs only rather there are some
principles or canons that guides government focus on certain area of public spending. The canon
of public spending is below:
1. Canon of benefit
2. Canon of economy
3. Canon of sanction
4. Canon of surplus
The political structure of an economy does not have any effect on the reasons why government
spend, be it, democratic government, monarchy government and autocratic government, public
expenditure reasons are all the same universally. The following are the reasons of public
expenditure:
1. Economic Development: Without government support and backing, a poor country cannot
make huge investments to bring about a favorable change in the economic base of a
country. That is why massive investments are made by the government in the development
of basic and key industries, agriculture, consumable goods, etc.
2. Fiscal Policy Instrument: Public expenditure is considered as an important tool of fiscal
policy. Public expenditure creates and increases the scope of employment opportunities
during depression
3. Redistribution of Income: Public expenditure is used as a powerful fiscal instrument to
bring about an equitable distribution of income and wealth.
3. 4. Balanced Regional Growth: Public expenditure can correct regional disparities. By
diverting resources in backward regions, government can bring about all-round
development there so as to compete with the advanced regions of the country.
2.0 THEORIES OF PUBLIC EXPENDITURE
Elucidating the trend of increase in government expenditure has always been a wide field in the
science of Public Finance which has necessitated many scholars and economists to propound
theories relating to public expenditure. The aim of those theories is not only to explain government
growth but also to find solutions in order to distribute public expenses more efficiently and to
derive the “optimal” size of the government.
2.1 WAGNER’S LAW OF STATE
Wagner's law of state, is known as the law of increasing state spending, is a principle named after
the German economist Adolph Wagner (1835–1917). He first observed it for his own country and
then for other countries. The theory holds that for any country, that public expenditure rises
constantly as income growth expands. The law predicts that the development of an industrial
economy will be accompanied by an increased share of public expenditure in gross national
product. The critiques to this theory are
1. The law is assumed to mirror Germany economic condition
2. The law make use of subjective and normative assumption in which Wagner reveals his
opinion on what ought to happen to an economy when it is industrialized
3. Wagner did not include the conditions of war in his theory
4. Wagner completely ignores the relation-ship between individual preferences and
government actions which is a strong simplification and thus a major shortcoming of his
theory. According to Wagner, the state represents a superior individual who makes
decisions without paying atten-tion to the individual human beings that actually form the
state.
2.2 MUSGRAVE’S HYPOTHESES
Based on Wagner’s theory, Musgrave also observes the changing role of the public sector during
the development process and therefore relies on structural factors in order to explain government
4. growth. According to Musgrave, economies situated in an early development stage are faced with
a high demand of public capital formation in order to install a basic infrastructure etc. At later
development phases, institutions for private capital for-mation become more developed and
therefore the share of public expenditure may decrease.
Despite the fact that this theory is quite plausible, it has one strong limitation which Musgrave
admits himself: While the stages-of-development approach is indubita-bly applicable in early
development phases, the size of public expenditure cannot be clearly predicted in later stages. It
need not always be the case that the share of the public sec-tor further decreases during later stages.
Due to the fact of changing private consumption pat-terns because of rising per capita income
during the late industrialization stages, it is possible that the public share rises again in order to
meet the growing demand of public goods such as education, infrastructure, social security, health
systems etc. It thus depends on the stage of income and on the individual needs of the citizens if
the public share rises or declines. Hence, Musgrave “remains ambivalent” concerning which
tendency of public expenditure will dominate at late development stages.
Wagner's statement in formal terms has been interpreted by Richard Musgrave as follows: As
progressive nations industrialize, the share of the public sector in the national economy grows
continually. The increase in State Expenditure is needed because of three main reasons. Wagner
himself identified these as
1. social activities of the state,
2. administrative and protective actions
3. welfare functions
2.3 PURE THEORY OF PUBLIC EXPENDITURE
In 1954 Paul Samuelson published his landmark paper The Pure Theory of Public Expenditure,
which formalized the concept of public goods (which he called "collective consumption goods") -
- i.e. goods that are non-rival and non-excludable. He highlighted the market failure of free-riding
when he wrote: "it is in the selfish interest of each person to give false signals, to pretend to have
less interest in a given collective consumption activity than he really has". His paper showed that
"no decentralized pricing system can serve to determine optimally these levels of collective
consumption".
5. Excludability is the ability of producers to detect and prevent un-compensating consumption of
their products. Rivalry is the inability of multiple consumers to consume the same good. A public
good is defined as a non-rival non-excludable good, such as national defense. Because public
goods are not excludable, they get under-produced. The pricing system cannot force consumers to
reveal their demand for purely non-excludable goods, and so cannot force producers to meet that
demand.
2.4 PEACOCK WISEMAN HYPOTHESIS
Peacock and Jack Wiseman advanced the study of growth of public expenditure through peacock
wiseman hypothesis by their study of public expenditure at Great Britain during the period 1890
to 1955.
peacock wiseman hypothesis focused on the pattern of public expenditure and stated the public
expenditure does not follow a smooth or continuous trend but the increase in public expenditure
takes place in jerks or steps. They gave three separate concepts to justify the hypothesis, they are
1. displacement effect: when a social disturbance occurs, the government raises taxes to
increase revenue and increases public expenditure to meet the social disturbance. This
creates a displacement effect by which low taxes and expenditures are replaced by higher
tax and expenditure levels. However, after the disturbance ends, the newly emerged level
of tax tolerance makes the people willing to support higher level of public expenditure
since it is capable of bearing heavier tax burden than before. As a result, the new level of
public expenditure and public revenue stabilize but are soon destabilized by another new
disturbance which causes another displacement effect.
2. Inspection effect: even if there is no new disturbance there is a no strong motivation to
return to lower level of taxation as the increased revenue can be used to support a higher
level of public expenditure. Therefore, government expands its fiscal operations partly due
to disturbance and partly to expand economic activity and take up new functions that were
earlier neglected.
6. 3. Concentration effect: when an economy is experiencing economic growth there is a
tendency of central government’s economic activities to grow at a faster rate than that of
state and local government activities. It is related to the political set up of the country
Thus, peacock wiseman hypothesis of government spending tend is more convincing than in
Wagner’s hypothesis. The natural course of advancement and structural changes in an economy
leads to constant and systematic expansion of public expenditure. An increase in public
expenditure can also be accredited to urbanization, population growth, awareness of civil rights,
awareness of duties by the state government etc.
3.0 PUBLIC REVENUE
3.1 INTRODUCTION
The income of the government through all the sources is called public income or public revenue.
According to Dalton, the term public income has two parts:
1. Public Receipts: Considering public income in wider sense, it includes all the incomes or
receipts which a public authority may secure during any period of time.
2. Public Revenue: Considering public income in narrower sense, it includes only those sources of
income of public authorities, which are ordinarily known as "revenue resources."
Major chunk of government revenue do come from taxes. Taxation is also used by Government as
a fiscal policy instrument to ensure redistribution of income among its citizens. Adam Smith’s
contribution to this part of economic theory is still regarded as classic. His presented theory on
taxation is still considered as the foundation of all discussions on the principles of taxation. There
are four essentials of his theory of taxation, i.e., equality, certainty, convenience, and economy.
The first canon is ethical and other three are administrative in character:
1. Canon of Equality: means the principle of justice, i.e., in accordance to ‘ability to pay’. This
is the most important canon of taxation. It lays the moral foundation of the tax system. The cannon
of equality does not mean that every taxpayer should pay at the same sum. That would be
manifestly unjust. Nor does it means that they should pay at the same rate, which means
proportional taxation, for a proportional tax is also not a very just tax. What this canon really
7. means is the equality of sacrifice. The amount of the tax paid is to be in proportion to the respective
abilities of the taxpayers. This clearly points to progressive taxation, i.e., taxing higher incomes
at higher rates.
2. Canon of Certainty: means the tax which each individual is bound to pay ought to be certain,
and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought to
be clear and simple to the taxpayer. According to Adam Smith, uncertainty in taxation encourages
insolence or corruption.
3. Canon of Convenience: Every tax, according to Adam Smith, ought to be levied at the time or
in the manner in which it is most convenient for the taxpayers to pay their dues. The canon of
certainty says that the time and the manner of payment should be certain. But the canon of
convenience states that the time of payment and the manner of payment should be convenient. For
example, if a tax on land or house is collected at a time when rent is expected to be received, it
satisfies the canon of convenience. If the tax can be paid through cheque, or credit card, or internet,
the manner is convenient, but not so if it is to be paid personally to the taxing authority. In the
latter case there will be a lot of inconvenience and harassment.
4. Canon of Economy: The tax will be economical if the cost of collection is very small. If, on
the other hand, the salaries of the officers engaged in collecting the tax eat up a big portion of the
tax revenue, the tax is certainly uneconomical. Similarly, such other huge and unnecessary
administrative costs will make the tax collection an extravagant task. If there is corruption or
oppression involved in the frequent visits to the income tax office and the odious examination by
the taxing officer, the canon of economy is not satisfied.
In broader sense, the canon of economy means a tax must not obstruct in any manner the ultimate
prosperity of the country. It would infringe the canon of economy if it retards the development of
trade and industry in any manner. If incomes are subjected to a very heavy tax, saving may be
discouraged, capital will not accumulate, and the productive capacity of the community will be
seriously impaired.
3.2 SOURCES OF PUBLIC REVENUE
Sources of Public Revenue are as follows:
8. (1) Non-tax Revenue
(a) Administrating Revenue: (i) Fee (ii) License fee (iii) Special assessment (iv) Fines and
Penalties (v) Forfeitures (vi) Escheat.
(b) Commercial Revenue: (i) Postage (ii) Toll (iii) Funds borrowed (iv) Prices paid for liquor (v)
Payment for electricity (vi) Railway tax/freight (vii) Irrigation charges
(c) Gifts and Grants
(2) Tax Revenue :
Types of taxes (i) Direct & Indirect Tax (ii) Specific & Advalorem tax (iii) Progressive taxes (iv)
Regressive taxes (v) Degressive taxes.
3.3 THEORIES OF PUBLIC REVENUE
3.3.1 DALTON’S CLASSIFICATION THEORY
Dalton provides a very systematic, comprehensive and instructive classification of public revenue.
In this opinion, there are two main sources of public revenue — taxes and prices. Taxes are paid
compulsorily whereas prices are paid voluntarily by individuals, who enter into contracts with the
public authority. Thus, prices are contractual payments.
Taxes are sub-divided into: (i) Taxes in the ordinary sense; (ii) Tributes and indemnities; (iii)
Compulsory loans, and (iv) Pecuniary penalties for offences.
Prices are sub-divided into: (i) Receipts from public property passively held such as rents received
from the tenants of public lands; (ii) Receipts from public enterprises charging competition rates;
(iii) Fees or payments charged for rendering administration services, such as birth and death
registration fees, and (iv) Voluntary public debt.
To these two groups must be added another group to make the classification exhaustive. Under
this group, the following items are included: (i) receipts from public monopolies, charging higher
prices; (ii) special assessments; (iii) issue of new paper money or deficit financing; and (iv)
voluntary gifts.
3.3.2 TAYLOR’S CLASSIFICATION THEORY
9. The most logical and scientifically based classification of public revenue is however provided by
Taylor. He divides public revenue into four categories:
(i) Grants and gifts
(ii) Administrative revenues
(iii) Commercial revenues
(iv) Taxes
REFERNCES
Eckhard, S. (2002) . A critical appraisal of the theories of government expenditure growth.
Seminar Paper. https://www.grin.com/document/16172
Muley, R. (2020). Public Expenditure: Causes, Principles and Importance
Musgrave, R.A. and Peacock, A.T. (1958). Classics in the Theory of Public Finance,
Macmillan and Co. Ltd., London.
Peacock, A.T. and Wiseman, J. (1967). Growth of Public Expenditure in the United Kingdom,
Rev edn., George Allen & Unwin Ltd., London.