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Public finance is the study of how the government (or public) sector pays for (or finances) expenditures through taxes and borrowing. Public finance adapts and applies the microeconomic theory of markets to the public sector and government activity.
Public finance is the study of how the government (or public) sector pays for (or finances) expenditures through taxes and borrowing. Public finance adapts and applies the microeconomic theory of markets to the public sector and government activity.
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Public finance is the study of how the government (or public) sector pays for (or finances) expenditures through taxes and borrowing. Public finance adapts and applies the microeconomic theory of markets to the public sector and government activity.
Авторское право:
Attribution Non-Commercial (BY-NC)
Доступные форматы
Скачайте в формате DOC, PDF, TXT или читайте онлайн в Scribd
The study of how the government (or public) sector
pays for (or finances) expenditures through taxes
and borrowing. Governments produce or provide valuable goods and services, such as education, security, and transportation. They pay for these goods by collecting taxes or, if taxes fall short, by borrowing through the financial markets. Public finance adapts and applies the fundamental microeconomic theory of markets to the public sector and government activity. In particular, this area of study analyzes the efficiency of taxes and the market failure of public goods. Public finance is also key to the study of government stabilization policies that address the inflation and unemployment problems of business cycles. In particular, fiscal policy is the manipulation of government expenditures and taxes to stabilize the business cycle. Public Finance Has Distinguishing Characteristics. - Man is by nature a social being, and consequently seeks the association of his fellow creatures. As this association develops and becomes more complex, the need for establishing and enforcing certain regulations appears, and governments are inaugurated to safeguard property and insure the orderly conduct of the community. The extent of governmental activities depends largely upon the degree of advancement in civilization. Among the primitive and backward peoples, the functions of governments are few and ill defined; whereas in highly civilized states they are numerous and, although often very complex, they are, nevertheless, well defined. The march of progress in the development of government is from the simple to the complex, and the more complex the organization the more numerous and difficult are the problems which present themselves.
The members of an advanced social group frequently fail to
comprehend the extent to which they are indebted to their government for the services which it renders them. The Constitution of the United States, for example, guarantees to the citizen the protection of life, liberty, property, and the pursuit of happiness; yet he often forgets that this guarantee entails the maintenance of armies and navies, of legislatures and judicial systems. The postman makes his semi-daily delivery of mail without a consideration by the ordinary citizen as to why or how. The modern progress in science, literature, agriculture, industry, and commerce is a matter of pride to every citizen, although the contribution of the various governmental units toward such progress is often forgotten. Government aid has fostered the development of educational institutions, the result of which has been that the development of science and literature has been hastened; experiment stations and schools have transformed agricultural methods; active health campaigns have wiped out the cause of diseases and pestilence; patent laws have stimulated inventions for the development of industry, and copyright laws have enhanced the quantity and quality of literature; while sound currency and banking systems have made possible modern commercial life.
A government has no superhuman power in exercising the
important function of supplying materials and services to a social group. It cannot create the materials and services, but must either secure them from some already existing source, or cause them to be produced, either by its own activities or by the activities of some other agency. The methods used by governmental units in securing materials and services differ widely, and after they have been secured the uses to which they may be put also differ widely. None the less, it is a part of the business of governments to secure the means of supplying the various demands made upon it by its citizens. The subject matter of Public Finance has to do with that group of governmental functions which have to do with the getting and using of materials and services.
The Word "Finance" Has No Definite Meaning
In the English language, at least, no definite meaning is
attached to the word "finance." A descriptive adjective is often needed to clarify the intended meaning and to avoid ambiguity. Such expressions as "private finance," " corporation finance," "high finance," and "public finance" are common in the daily newspapers. There are treatises on corporation finance, for example, which explain the nature and business methods of corporate organizations. The use of the term "finance" in connection with a firm, business, or individual frequently has reference to the condition of the capital or assets, as, for example, "the finances of this business are in good condition."
The ambiguity which arises with the use of the word
"finance," unmodified, may be avoided when the use of the adjective is contemplated. Two forms of the word appear - "financial" and "fiscal" - and a uniform use of the words for particular meanings would be conducive to clearness. The word "financial" has had no definite meaning. A financial magazine, for example, treats of stocks, bonds, dividends, and similar items, while the financial condition of a country has to do with its money, credit, and banking. The word "fiscal," however, has usually had a more definite meaning, although its use has not always been clearly separated from that of "financial." For the most part, however, "fiscal" has been used in referring to the expenditures and revenues of political bodies. A financial year, for example, might refer to any number of conditions, while a fiscal year more definitely refers to the revenues and expenditures of a political unit for a particular period of time. The fiscal year of the Federal government begins July 1st and ends June 30th. In this book the word "fiscal" will be used to refer to conditions which are related to revenues and expenditures of political bodies.
Public Finance is primarily concerned with fiscal aspects, yet
these aspects are often substantially influenced by financial circumstances. A sound and efficient banking and currency system, for example, materially aids in the collection and expenditure of public revenues. It may not always be possible, indeed, to separate the fiscal from the financial conditions, as when, in times of war, a government issues fiat money or treasury notes for the purpose of securing funds. Fiscal authorities are likewise concerned about the financial conditions of industries, because it is to productive enterprises that they must turn as an important source of revenue. Panics and crises, moreover, do not affect industries alone, but the fiscal condition of political bodies as well. A distinction can generally be drawn between aspects of a fiscal and of a financial nature, and our concern in this book will be with the former - aspects which deal with expenditures and revenues of governments.
Public Finance Is a Division of Economics
There has been some discussion as to whether the study of
Public Finance properly belongs in the field of Economics. Some writers treat fiscal problems in their works on general economics, while others treat the problems under the caption, "Economics and Public Finance." Still other writers on general economics give no discussion of public expenditures and revenues. The great amount of attention which has been devoted to a discussion of private consumption, production, and distribution has emphasized the importance of these phenomena, yet the fact remains that public revenues and expenditures are of sufficient economic consequence to command the attention of students of economics.
The principles which underlie the study of Public Finance are
clearly the same as those which underlie the study of the other fields of economics. Economics deals with laws which govern the activities of individuals in the expenditure of energy to supply their wants. Public Finance is also a study of the exertion of individual effort to supply wants. Governments secure, through taxes or otherwise, some of the returns from individual effort as a prerequisite to supplying materials and services. The individual is concerned with comparing the utility furnished by the government with the utility he could have secured had the government made no demands upon him. No individual income can remain unaffected when a part of it is taken in the form of a tax.
Public funds are frequently used, either to aid private
production or directly to carry on productive enterprises. Those who are interested in efficient production must be concerned about such uses of public funds, and those who have the direction of public funds for productive enterprises should know the economic principles upon which efficient production rests. The successful management of a government industry must be based upon just as sound economic principles as is a successful industry conducted by individuals. When the effect of securing revenues in different ways is considered from the standpoint of justice, some definite theory of distribution must be in mind. The suggestion to adopt a rigorous single tax, which would take the economic rent of land in taxes, immediately arouses the interest of those who are concerned with rents and land values. Any income, whether it is paid from a public purse or from a private purse, is of economic concern. Fiscal officials are concerned with the relationship of cause and effect in the collection and use of public revenues; here the thought is guided by the same economic laws that govern in the problem of the distribution of wealth. The underlying principles of Public Finance, then, are the same as those upon which all sound economic reasoning is based.