All About Public Finance, Nature of Public Finance

public finance

Broadly speaking, public finance is related to income and expenditure of the government. Public finance deals with the expenditure and income of public authorities of the state and their mutual relation as also with financial administration and control. In narrow sense,. public finance deals with any public expenditure and public revenue but in broad sense public finance also includes, besides public revenue and public expenditure, public debt, financial administration and fiscal policy. In present days the scope of public finance has been widened which includes public income expenditure and allied activities.

According to Prof. Findlay Shirras, “Public finpnce is the study of
principles underlying the spending and raising of funds by public

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

According to Adam Smith, “The investigation into the nature and principle of state expenditure and state revenues called Public Finance.

According to Bastable, “Public finance deals with expenditure and
income of public authorities of the state and their mutual relation as also with the financial administration and control.

Elements of Public Finance

l. Public Revenue : In this branch Of Public Finance, various sources of
public revenue, tax structure and tax system etc. are studied. It is public
revenue through which the government performs its various activities.

  1. Public Expenditure : The government has to incur various types of expenditure in present welfare society. Various principles Of public
    expenditure, its effects on economy, various policies including budget etc. are studied in this branch of public finance. Public expenditure obtains that very similar place in public finance which consumption has in economics.
  2. Public Debts : In present days, government is performing various welfare oriented development policies and as a result public expenditure exceeds public revenue in most of the cases. Under these circumstances, the government secures public debts—both internal as well as external. Debt policies, their methods of obtaining, their effects, ways of redemption etc. are studied in this branch of public finance.
  3. Financial Administration : The management of all financial activities is studied in this branch of public finance. Budget making,publication, auditing etc. are also included in financial administration.
  4. Economic Stabilisation : The various policies related to economic stability are studied in this branch of public finance. Various fiscal and tariff policies are included under this section. With this section of public finance, government regulates and controls complete economic system. This branch Of public finance helps in obtaining the objective of maximum social advantage.

Importance of Public Finance

Adam Smith and his followers advocate for the policy of Laissez-Faire
i.e., non-intervention. Adam Smith presented the view that government
should confine itself with domestic law and order and border security
arrangement. In this way, the economists under leadership of Adam Smith gave no special importance to public finance.But modem economist Prof. J. M. Keynes criticized the view point Of classical economist and advocated for the policy Of State intervention. In present days the activities on the part of government are increasing for which government has to incur heavy expenditures. Establishing welfare state, planning, social security etc. are various duties which the government has to perform and incur heavy expenditure. In Other words, public finance plays a dominant role in obtaining the objective of public social advantage in the present days.


Please enter your comment!
Please enter your name here