public economics

1. INTRODUCTIONTO PUBLICECONOMICS
Shri RamswaroopMemorialUniversity,Barabanki,225003
Dr Veena Singh, Assistant Professor ,Faculty of Commerce & Economics ,
Institute of Management, Commerce &Economics
E-Mail : Veenasingh.imce@srmu.ac.in
Prof.(Dr) Alka Singh , Dean, commerce and economics
E-Mail:-dean.comandeco@srmu.ac.in

2. Public finance is a study of income and expenditure or
receipt and payment of government. Public Finance:
Meaning, Definition, Scope, and Divisions – The
concept of Public Finance: Meaning of Public Finance,
Definition of Public Finance, Scope of Public Finance,
and Divisions of Public Finance.
Professor Bastable, an English economist defines public
finance as a subject that deals with the expenditure and
income of the public authorities of the state. Both the aspects
(income and expenditure) relate to the states financial
administration and control.

3. Meaning, Definition, Scope, and
Divisions.
 Dalton defined the subject as one which concerns itself
with the income and expenditure of public authorities and
the adjustment of one to the other. It is learned that the
study of the subject chiefly centers around different aspects
of government revenues and government expenditure in
relation to the state’s economy and people.
 It deals the income raised through revenue and
expenditure spend on the activities of the community and
the terms “finance” is money resource i.e. coins. But the
public is collected name for an individual within an
administrative territory and finance.

4. Meaning of Public Finance:
 In public finance, we study the finances of the
Government. Thus, public finance deals with the
question of how the Government raises its resources to
meet its ever-rising expenditure. As Dalton puts it,”
public finance is “concerned with the income and
expenditure of public authorities and with the
adjustment of one to the other.”
 Accordingly, the effects of taxation, Government
expenditure, public borrowing and deficit financing
on the economy constitutes the subject matter of
public

5.  finance. Thus,
 Prof. Otto Eckstein writes “Public Finance is the study of
the effects of budgets on the economy, particularly the
effect on the achievement of the major economic objects
growth, stability, equity, and efficiency.”
 Further, it was thought that the Government budget must
be balanced. Public borrowing was recommended mainly
for production purposes. During a war, of course, public
borrowing was considered legitimate but it was thought
that the Government should repay or reduce the debt as
soon as possible. Public authorities undertake activities
for individuals living within an administrative territory.
Finance usually means income and expenditure.
 So public finance means income and expenditure of the
public authorities and adjustment of one to the other.

6.  When we talk of public we mean public authorities.
 Public authorities include central government, state government
and local governing bodies.
 When we talk about finance, we mean income and expenditure.
 Public finance is the fiscal science which implies the science of
public treasury.
 So public finance is a study of income and expenditure of the
public authorities and adjustment of one to the other, and.
 Objectives of public finance (objectives like higher growth, better
distribution of wealth, income, property, economic stability etc)
can be secured through taxation, public expenditure, public debt
management fiscal federalism, and fiscal administration. Public
revenue, public expenditure, public debt management, fiscal
administration, and fiscal federalism are the main branches of
public finance.

7. Definition of Public Finance:
 According to R.A. Musgrave says,
 “The complex problems that center on the revenue-expenditure
process of government is traditionally known as public finance.”
 According to prof. Dalton,
 “Public finance is one of those subjects that lie on the borderline
between economics and politics. It is concerned with the income
and expenditure of public authorities and with the mutual
adjustment of one another. The principal of public finance are
the general principles, which may be laid down with regard to
these matters.”
 According to Adam Smith,
 “Public finance is an investigation into the nature and principles
of the state revenue and expenditure.”
 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.”

8. The scope of Public Finance
 The scope of public finance is not just to study the
composition of public revenue and public expenditure.
It covers a full discussion of the influence of
government fiscal operations on the level of overall
activity, employment, prices and growth process of the
economic system as a whole.
 According to Musgrave, the scope of public finance
embraces the following three functions of the
government’s budgetary policy confined to the fiscal
department:
 The Allocation Branch.
 The Distribution Branch, and.
 The Stabilisation Branch.

9. Theserefertothreeobjectivesof budgetpolicy, theuseoffiscalinstruments:
 To secure adjustments in the allocation of resources.
 To secure adjustments in the distribution of income and
wealth, and.
 To secure economic stabilization.
 Thus, the function of the allocation branch of the finance
department is to determine what adjustments in allocation
are needed, who shall bear the cost, what revenue and
expenditure policies to be formulated to fulfill the desired
objectives.

10.  The function of the distribution branch is to determine
what steps are needed to bring about the desired or
equitable state of distribution in the economy and the
stabilization branch shall confine itself to the decisions as
to what should be done to secure price stability and to
maintain full employment level.
 Further, modern public finance has two aspects:
 The positive aspect, and.
 Normative aspect.

11.  In its positive aspect: The study of Government finance is
concerned with what are sources of public revenue, items
of public expenditure, constituents of the budget, and
formal as well as effective incidence of the fiscal
operations.
 In its normative aspect: Norms or standards of the
government’s financial operations are laid down,
investigated, and appraised. The basic norm of modern
finance is general economic welfare. On normative
consideration, public finance becomes a skillful art,
whereas, in its positive aspect, it remains a fiscal science.

12. The main scope of public finance may
be summarised as under:
 Revenue.
 Expenditure.
 Debt.
 Financial Administration, and.
 Economic Stabilisation.

13.  Public Revenue:
 Public revenue concentrates on the methods of raising public revenue,
the principles of taxation and its problems. In other words, all kinds of
income from taxes and receipts from the public deposit are included in
public revenue. It also includes the methods of raising funds. It further
studies the classification of various resources of public revenue into
taxes, fees, and assessment etc.
 Public Expenditure:
 In this part of Government finance, we study the principles and
problems relating to the expenditure of public funds. This part studies
the fundamental principles that govern the flow of Government funds
into various streams.

14. Public Debt:
In this section of public-finance, we study the problem of raising loans. The
public authority or any Government can raise income through loans to meet
the shortfall in its traditional income. The loan raised by the government in a
particular year is the part of receipts of the public authority.
Financial Administration:
Now comes the problem of organization and administration of the financial
mechanism of the Government. In other words, under financial or fiscal
administration, we are concerned with the Government machinery which is
responsible for performing various functions of the state.
Economic Stabilization:
Now, a day’s economic stabilization and growth are the two aspects of the
Government economic policy which got a significant place in the discussion
on public finance theory. This part describes the various economic policies
and other measures of the government to bring about economic stability in
the country.

15.  Divisions of Public Finance
 Public-finance is broadly divided into four branches. These are
Public Expenditure, Public Revenue, Public Debt, and Financial
Administration. Under Public Expenditure, we study the various
principles, effects, and problems of expenditure made by the
public authorities.
 Ensure That Business Finance Are Kept
 Under the branch of Public Revenue, we study the various ways of
raising revenues by the public bodies. We also study the principles
and effects of taxation and how the burden of taxation is
distributed among the various classes in society. Public Debt is the
study of the various principles and methods of raising debts and
their economic effects.
 It also deals with the methods of repayment and management of
public debt. The branch of Financial Administration deals with
the methods of budget preparation, various types of budgets, war
finance, development finance, etc.

16. Need for Public Finance
 We all know that the existence of a large and growing
public sector is a reason enough to study public-finance.
Adam Smith in his monumental work. The Wealth of
Nations laid out the basic jobs of the government.
 The government is to play an important role in providing
for the defense of the nation, the administration of justice,
and in the provision of those goods and services not wholly
to be the result of the ordinary private activity. Adam Smith
also had an acute awareness of the problems that would be
associated with raising the funds needed to finance these
obligations.
 His four maxims of taxation remain today a guide in
designing a nation’s revenue structure. The four maxims
focus attention on matters of economic efficiency as well as
equity.

17.  Conclusion:
 So, 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, Public
Finance is the branch of economics that studies the taxing and
spending activities of government.
 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. From the above discussion, we can say that the subject-
matter of public finance is not static, but dynamic which is
continuously widening with the change in the concept of state
and functions of the state.
 As the economic and social responsibilities of the state are
increasing day by day, the methods and techniques of raising
public income, public expenditure and public borrowings are
also changing. In view of the changed circumstances, it has given
more responsibilities in the social and economic field.

18. References
 H. L. Bhatia, Public Finance, 29th Edition, Vikas
Publishing House, 2018.
 Jogider Singh &Lekhi R.K., Public Finance, Kalyani
Publishers ,Ist edition-2010, rev. edition, 2016
 R2.GauravDatt, Ashwani Mahajan, Dutt& Sundaram’s
Indian Economy, S. Chand,72nd edition, 2018