This advance also introduced economists to the mathematics of inequalities as opposed to exact equation. Internally also in view of clash of linguistic, territorial and political interests, lot of expenditure has to be incurred on maintaining internal security. Taxes therefore should be treated as a payment for the goods and services provided by the government. Established companies may sell additional shares or issue corporate bonds to raise money. Public Finance as Art Art is application of knowledge for achieving definite objectives. Apart from ensuring constant and uninterrupted flow of revenue to government revenue, taxation serves other fiscal policy objectives as well.
Need of effective Public Finance Management State as well as central governments formed worldwide have been witnessed on-going and continuous fiscal imbalances, financial failures due to underlying complex financial systems and products. Principles of a Good Tax System: Taxation being compulsory contributions from individuals, or business entities to the government to defray the public expenditures by the government has some effects in the economy as well as in the social life of the society. These subsidies and grants have special place in the Government expenditure of underdeveloped and backward countries. June 6, 2013, at the From Online, 2008. The Marxian approach, moreover, culminated in three generalizations about capitalism: the tendency of the rate of profit to fall, the growing impoverishment of the working class, and the increasing severity of , with the first being the linchpin of all the others.
For example, if authorities learned of a bomb threat in a specific building in a city, they would take measures to protect the people in that building as well as in surrounding areas. It may be noted that at present benefits of these subsidies are enjoyed not only by the poor but all those who are relatively well off. In particular, Pigou is known for his advocacy of what are known as corrective taxes, or : It is plain that divergences between private and social net product of the kinds we have so far been considering cannot, like divergences due to tenancy laws, be mitigated by a modification of the contractual relation between any two contracting parties, because the divergence arises out of a service or disservice to persons other than the contracting parties. It studies the relationship between facts relating to revenue and expenditure of the government. Obligatory functions include defense of the country and the maintenance of law and order situation in different parts of the country in order to ensure peace to its citizens.
Now, this compensatory fiscal policy is being followed by all the world over, since achievement of full employment and maintenance of economic stability has become an important objective of the Government. The effect might be constructive to the economy or might damage the economy. Fiscal Federalism, Harcourt Brace Jovanovich, Inc. The classical economists identified the major economic problem as predicting the effects of changes in the quantity of capital and labour on the rate of growth of national output. But the use of public expenditure to reduce inequalities in income distribution has certain bad effects also.
This part describes the various economic polices and other measures of the government to bring about economic stability in the country. Public Finance is an Art: In the words of J. Too large inequalities in income distribution as produced by the free working of market system are not only socially unjust, but also not conducive to the maximisation of social output. Effects of Public Expenditure on Distribution : In the modern times the Government modifies the free working of market mechanism in respect of income distribution not only through devising proper tax structure but also through various forms of public expenditure. Therefore, public finance has not only to augment resources for development and to achieve optimum allocation of resources, but also to promote fair distribution of income and expansion in employment opportunities. Further, it was thought that Government budget must be balanced. Businesses may purchase dividend-paying stocks, bonds, or interest-bearing bank they may also buy other companies in an effort to boost revenue.
The institutionalists are more difficult to categorize. Then it makes payment in the form of direct money transfer to bring the incomes of all families upto that standard or at least to close a large part of the gap between their income and poverty income standard. On the other hand, the Government encourages the exports of its surplus production. Matters of personal finance include, but are not limited to, the purchasing of financial products for personal reasons, like credit cards; life, health, and home insurance; mortgages; and retirement products. For example, India might be able to produce everything more efficiently than England, but India might profit most by concentrating its resources on textiles, in which its is relatively greater than in other areas of Indian production, and by importing British capital goods. The critics said that economics should abandon its claim of being a value-free social science and address itself to the great questions of the day—those of , , , and environmental —even at the cost of analytical rigour and theoretical elegance.
Emphasis is on analytical and scientific methods and normative-ethical analysis, as distinguished from. Increase or decrease in tax rates usually does not affect the general price level. It was further demonstrated by Keynes that deficit financing by the Government could activise a depressed economy by creating income and employment much more than the original amount of deficit financing through the process of multiplier. It is not too much to say that nearly the whole of modern economics is Walrasian economics, and modern theories of money, employment, international trade, and economic growth can be seen as Walrasian general equilibrium theories in a highly simplified form. Since every tax is likely to be opposed, it becomes essential to plan their timing and volume.
In positive science one knows about factual situation or facts as they are. Today there is hardly a government, international agency, or large that does not have its own staff of economists. According to his theory, lapses from full employment or depressions are caused by deficiency of aggregate demand due to the slackened private investment activity. The police force is a good example of this. It pertains to management of financing activities and expenditures of public authorities like central or state governments and all other public governing bodies. A public good is typically financed by the government through the use of tax revenues, but it can be married to a private good or service as well.
This inflation hurts the poor most and will therefore cancel out the desired distributive effects of public expenditure. Furthermore, certain investors have been able to consistently outperform the broader market for long periods of time, most notably famed stock-picker , who at the time of this writing is the second-richest individual in the U. The public expenditure can be used as a lever to raise aggregate demand and thereby to get the economy out of recession. It is, therefore, claimed by some that indirectly, expenditure on defence and civil administration is also productive. The elastic tax system yields adequate revenue for planned projects. Expenditure on these schemes has greatly risen in recent years.