Public Finance a Positive Science or a Normative Science?

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Public Finance

Nature of Public Finance: Public finance faces a burning controversy whether it is a science or an art and further whether it is a positive science or a normative science.

Public Finance as a Science

Science is that branch of knowledge, in which One gets systematic knowledge.
Science measures the perfect knowledge about a substance obtained
with the assistance of careful experiment, honest observations and accurate
reasoning.

Prof. Plehan has considered public finance as a science and it has been
supported by the following reasons :
(i) It does not study the whole human knowledge, but it is limited to the special study of human knowledge.
(ii) Scientific methods are used in the study of public finance.
(iii) It clearly discussed and about the specific goods.
(iv) It collects systematically the facts and frames principles of any study subject.

Thus, it is said that public finance is a science for closely related with
Economics and political science.
There are two types of science—
(i) Positive Science, and
(ii) Normative Science.

Positive science studies about the fact of the commodity and tells what is the situation? Positive science is just like a lamp symbol, which shows light to the ships and indicates that where is the rock, but it does not indicate that the ship should move towards East or West. But on the contrary, in Normative Science, one has to study not only the real status but about the ideality of the problem. It emphasises only ‘what should be done’ ? According to prof Keynes, “Positive science is a group of systematic knowledge and normative
séiencé is the knowledge of that group which relates to the establishment of
ideals.

Public Finance—as a Positive Science

During the ancient period, no weightage was attached to the subject as there was a complete absence of government control, no unification Of’ihe people, and no common efforts were made to achieve any common motto. All classical economists have faith in ‘Laissez-faire’ and ‘market mechanism’ with minimum functions to be performed by the government.

As a positive economics, they are concerned as to how public authorities have collected revenue, how they make public expenditure, and how both are administered. They are least interested to know how revenue and expenditure of the public authority affect, or will affect the social and economic aspects of life. In other words, the study of the effects of fiscal operations or budgetary process were not considered and outrightly rejected the normative aspect of the subject.

Public Finance—as a Normative Science

After the great depression of 1929-30, radical changes took place in the world economy. J.M. Keynes in his, “General Theory Of Employment, Interest, and Money” has greatly influenced the economic activities and the level of employment has become an integral part of the subject of public finance. Modern scholars believed that the effects Of fiscal operations are not only explained but it can also be assessed as to the extent they are good or bad. Actually, it is the welfare aspect of the subject, which makes public finance a normative science. The principle of maximum social advantage is the guiding principle of public finance.

Hence, public finance cannot ignore the version of ‘what ought to be’. Public finance should be recognized as a normative science. Therefore, fiscal operations are used -to check fluctuations in the trade cycle, reduce unemployment and under-employment and help equal distribution of income and wealth, capital accumulation, economic stability with growth and to reduce regional disparities.

Public Finance as an Art

The systematic and practical shape of any science is known as an art. The knowledge about anything is science but when it is implemented practice it is called Art.

public finance is an art when the government gets the revenue from various sources and spends it to get the maximum social welfare. Conclusion—It can be concluded that public finance is both science as well as an art. Public finance as a science shows the map for the construction of houses out Of the bricks and public finance as an art gives it a practical shape.
For example, when the principles of revenue and expenditure are studied it is a scientific study, and when these policies are used by the government in serving the financial problems, it becomes an art.

Main Thoughts about Nature of Public Finance


The main thoughts about the nature of public finance areas under-
(1) Theory of Activating Finance—The national income increases on account Of saving and investments. The main reason for poverty is the deficiency Of national income. Hence, in order to remove poverty, it is necessary that the resources of the country should be used at the maximum level.
(2) Theory of New Economics—This principle was propounded by
Keynes and Henson. It was mentioned in the principle that there should be stability in consumption and compensatory activities with the help of fiscal policy; regulated in the economy. This work is done by the State in the capitalist economy.
(3) Pure Theory or Public Finance—Seligman invented this principle.
Illis principle considers the problems relating to public income, public expenditure, and loans. The main purpose of fiscal policy is to reduce the inequality in the State.
(4) Socio-politicalI Theory—Wagner and Edgeworth are the main supporters of this theory. The main aim of fiscal policy is to transfer the money from rich to the poor, so that social welfare may be increased in the society.
(5) Theory of Functional Finance—Lerner gave the name of functional finance to the Keynesian approach. The fiscal measures are used for functional activities. no demand for money is created and increased with the help of functional finance.
(6) Classical Theory of Public Finance—Supply creates its own demand, hence there cannot be unemployment or overproduction in the economy. Efforts are made to create full employment. The State tries to increase its economic activities only basis of full employment.
(7) Musgrave’s Views on the Theory of Public Finance—The theory Of public finance of Musgrave can be mentioned in two ways—(i) To make the rules for making the public economy as efficient one, and (ii) To develop such theories which may be helpful for the implementation of the present theory.

The aim of public finance is concerned with the first and theoretical importance is given to the second.

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