J. M.

Keynes, “General theory of Employment, Interest and Money” in 1936

Dr. Macro

Phillip E. Taylor

Charles F. Bastable,

Carl C. Plehm

Prof. Findlay Shirras

Mrs. Ursula Hicks

Richard A. Musgrave

Scope and Subject Matter of Public Finance

Public Finance is the study of the income and expenditure of the state. Public Finance is
concerned with the operation of the public treasury. Hence to the degree that it is a science, it is a fiscal
science, its policies are fiscal policies, its problems are fiscal problems.
There is no denying the fact that the science of Public Finance deals with the finances of the
state. Public Finance is the study of not only the activities of the State but also the financial implications
and other aspects of such activities, Modern State has to perform manifold functions and for the
performance of these functions funds are needed. So, the scope of Public Finance is the study of
collection of these funds and their allocation to various branches of activities.
Adam Smith, the father of political economy, first started a systematic discussion of Public
expenditure in his famous book, “An Inquiry into Nature and Causes of the wealth of Nations”.
According to him the “Duties of sovereign” fall into the three categories a) defending the society from
violence and injustice of other independent societies (b) securing internal justice between citizens, (c)
maintaining those public institutions…. In modern terminology, the third duty can be described as
expenditure on economic and social ends. Though, this duty or function of the state cannot be
considered the fundamental one but too much importance has been attached to it in the present era.

In well advanced countries, the governments are responsible for maintaining the stability and
expanding the level of employment and bringing about the goal of full employment as far as possible.
They are actively engaged in maintaining a continuous and sustained growth. The rise of modern states
has been accompanied by an increase in the number of functions and consequently the scope and
importance of Public Finance. However, in general the following services are provided by the
government in a modern state:
i. Security, both internal and external;
ii. To control and regularize the economic enterprise;
iii. Justice or the settlement of disputes;
iv. The social cultural welfare of the people
v. To make proper utilization of natural resources
vi. The regulation of moral standards;
vii. The control of communication and transportation for the promotion of unity of the state;
viii. The administration of financial system, expenditure revenues and fiscal control;
ix. Religion and religious rights and
x. Proper and efficient administration;
Thus, keeping in view of the various functions, the State has to mobilize its resources with the help
of method laid down in the economics of Public Finance. There is a difference between the “Public
Economics” and “Public Finance”. Public economics is the exact counterpart of the private economics
with not only studies the Public Finance but also the other activities of public welfare performed by the
state. Therefore, whole of public economics studies the desirability of the poor relief measures;
provident fund schemes etc., while Public Finance is concerned with methods of raising and allocating
the funds between these activities.

The subject matter of Public Finance which has been ever- widening, consist of the following five
parts:
i. Public income -this part includes the study methods of raising public revenues and the
principles of taxation;
ii. Public expenditure - this consist of the study of the principles and effects of public
expenditure;
iii. Public debt –this part studies the causes and methods of public borrowing as well as the
public debt management;
iv. Financial administration –which includes the preparation and sanctioning of the budget,
auditing, etc and
v. Fiscal policy-this part studies the use of Public Finance operations to bring about economic
stability and growth in the country.

It was Adam Smith, the Father of Economics, who gave a detailed account of the problems of ‘public
finance’ and recognized the close connection between science of finance and the theory of economics.
Following Smith, other classical economists went on writing on one issue or the other in the field of
‘public finance’. (https://www.investopedia.com/updates/adam-smith-economics)

Explicitly explained in the article published at http://www.simplinotes.com/public-finance/2/, that

the word public refers to general people and the word finance means resources. So Public Finance
means resources of the masses, how they are collected and utilized. Thus, it is the branch of economics
that studies the taxing and spending activities of government.

It is that branch of general economics which deals with the financial activities of the state or
government at national, state and local levels. The discipline of public finance describes and analyses
government services, subsidies and welfare payments, and the methods by which the expenditures to
these ends are covered through taxation, borrowing, foreign aid and the creation of money.
 As published in the book The Science of Public Finance by G. Findlay Shirras, “Public finance is the
study of principles underlying the spending and raising of funds by public authorities”. (The Science of
Public Finance by G. Findlay Shirras, London, Macmillan and Co., Limited, 1924)
(https://www.worldcat.org/title/science-of-public-finance/oclc/1470605)

According to H.L Lutz, “Public finance deals with the provision, custody and disbursement of
resources needed for conduct of public or government function.”

According to Hugh Dalton, “Public finance is concerned with the income and expenditure of
public authorities, and with the adjustment of the one to the other.

Public finance is the management of a country’s revenue, expenditures, and debt load through
various government and quasi-government institutions. This guide provides an overview of how public
finances are managed, what the various components of public finance are, and how to easily understand
what all the numbers mean. A country’s financial position can be evaluated in much the same way as a
business’ financial statements.
https://corporatefinanceinstitute.com/resources/knowledge/finance/public-finance/

Collection of taxes from those who benefit from the provision of public goods by the
government, and the use of those tax funds toward production and distribution of the public goods.
http://www.businessdictionary.com/definition/public-finance.html

Based on the publication at http://shodhganga.inflibnet.ac.in/bitstream/10603/10117/11/11_

chapter%203.pdf, page 74, Public Finance is a living branch of economics as it is the kingpin of the day to
day activities of the State. “Public Finance” is that branch of general economics which deals in the
financial activities of the State or Government at national, state and local levels. With the broadening of
the activity base of governments over the past three centuries or so, the study of ‘Public Finance’ has
assumed lot of importance.

Adapting to climate and environmental change

Take urgent action to combat climate change and its impacts. Climate change is no longer a distant
threat. The strong typhoons and droughts that hit the Philippines in recent years gave a preview of the
severe implications it will continue to have on the agriculture sector and related issues of national
interest such as food security, economic growth and the eradication of rural poverty.

In spite of being one of the most disaster-prone countries, the Philippines remains to be a leading
example in building institutional capacities for managing and reducing risks to natural hazards and
climate change. FAO is a proud partner in building resilience in the agriculture sector.

Moving forward with its adaptation agenda, the country is working with FAO to improve strategic
climate risk management and accelerate the uptake of medium and long-term risk reduction practices
across the policy level, the agriculture industry and down to farming and fishing communities. Current
activities build on the results of several resilience projects jointly implemented by FAO and the
Department of Agriculture since 2009, including climate change adaptation capacity building
in the Cordilleras; analysis and mapping of impacts under climate change for adaptation and
food security; climate risk management strengthening in the Bicol Region; and the National Disaster Risk
Reduction and Management Strategy for agriculture and fisheries, among others.