What is Public Finance: In this article, you will going to find out about what exactly public finance is all about that is the query “what is public finance” is solved.
What is Public Finance?
So, first of all, what is public finance? The study of the role of government in the economy is called public finance. It is that branch of economics that measures the income and expenditure of the government. That is, public finance is a detailed study of the income and expenditure of the government. Through this, an account of the income earned by the state and the expenditure incurred by the public officials is presented. The income and expenditure of the government are regulated by marginal coordination so that maximum public interest can be achieved. It also suggests necessary variations in them to achieve the desired effect and avoid unwanted effects. Public finance means that the provision related to income and expenditure has a direct impact on the standard of living of the people and the development process of the country.
Public finance refers to the financial resources i.e. income and expenditure of the government of a country. In other words, the study of the problems related to income and expenditure of the government is called public finance. According to Findlay Shiraz, “Public finance is the study of the principles involved in the collection and expenditure of income by government officials.” According to Dalton, “Public finance is such a subject which studies the income and expenditure made by mutual cooperation of public officials”. Thus it can be said that public finance is the study of finance-related subjects of the central, state, or local governments.
Public finance sector
1. Public Revenue:
In the subject area of public finance, we study the accumulation of wealth and its distribution in various activities. Public revenue is concerned with the sources of income, the principles of taxation, and their problems. In other words, all income from taxes and receipts from public deposits are included in public revenue.
2. Public Expenditure:
In this section, we study the principles and problems related to public expenditure. In this, we also study the classification of public expenditure on various grounds. In this, we make a critical survey of the policies adopted by the government on public expenditure and suggest measures for improvement.
3. Public Debt:
In this section of Public Finance, we study the problem of making loans. Do we see why the loan is being taken? What is the source of the loan? How to collect it? What is the interest in that? And what is the mode of payment thereof? So it deals with the problem of collecting and paying off debt.
4. Financial Administration:
Under the financial or revenue administration, we belong to the government which is responsible for the various functions of the state. The important topic related to financial administration is how to implement the budget? Apart from this, the whole process of budget preparation includes budget presentation, passing, implementation, and evaluation, etc.
5. Economic Condition:
In this, the measures taken by the government to bring economic stability in the country and other measures and various economic policies are described.
nature of public finance.
The nature of public finance refers to the discussion of whether public finance is a science or an art or both. The question also arises about the nature of public finance whether it is only a real science or normative science.
Public finance is a real science
Science is the systematic study of a subject in which the cause and effect of facts are studied. In public finance, the subject related to the income and expenditure of the government is studied sequentially. In this, the relationship of cause and effect found in the facts related to income and expenditure of the government is also studied. For example, it is known from the study of public finance that if taxes are levied at a higher rate, they can have a bad effect on production and consumption. Thus public finance is real science.
Now the question is whether public finance is a real science as well as a normative science. Real science is concerned with ‘what is’ whereas normative science is concerned with ‘what should be’. Public finance is a real science as well as a normative science because the study of public finance also gives an idea of how much taxes should be levied. On which items public expenditure should be increased and on which items should be reduced. Thus public finance is also a normative science.
In other words, it means that public finance not only interprets actions but also evaluates whether they are good or bad. It is this welfare aspect of public finance that makes it a normative science. So public finances are also related to ‘what should be’. Therefore, it is used in the form of revenue activities to prevent fluctuations in the business cycle, prevent unemployment and reduce hidden unemployment, ensure equitable distribution of income and wealth, economic stability and growth and reduce regional problems.
Public finance is an art
Art is the application of knowledge to achieve certain objectives. Knowledge related to the government’s income and expenditure is used by public finance, revenue policy for achieving the objectives of full employment, economic equality, economic development, price stability, etc. For example, to achieve the goal of economic equality, taxes are levied at a progressive rate. The act of levying tax is definitely an art and budgeting is also an art in itself. Thus the study of public finance proves helpful in the study of many practical problems. Therefore, public finance is also an art.
Thus it can be said that public finance is both a science and an art. It is a real science as well as a normative science.
Importance of public finance
Now, you have understood what is public finance, so now we will what is the importance of public finance. Public finance plays an important role in developed and developing countries. Government performs many activities, so in present times, public finance has acquired great importance.