Meaning of Public Expenditure: Expenses incurred by the public authorities—central, state and local self- governments—are called public expenditure. The whole constitution of the societies of Greece and Rome was based on conceptions directly opposed to those under which our modern doctrines have been formed. For example, expenditure on education, public health, transport, defence, law and order, general administration. As a study of human wants must form the basis of the economic theory of consumption, so must an examination of the number and order of state wants be an essential part of our present inquiry. It builds up not only social infrastructure but also economic infrastructure in the form of transport, electricity, etc. Land taxes in Italy, Spain, Portugal, Belgium, and Greece.
Complexity of the forms of revenue. Efficiency in public expenditure requires economy of expenditures. But the firmer organisation of the centralised monarchies of France, Spain, and England, the development of money dealings, and the revolution in economic relations produced by the supplies of the precious metals from the New World, presented to reflective minds a series of problems which could not be solved without the aid of wider conceptions; and accordingly we find that the latter part of the sixteenth century exhibits a new development of social and political inquiry. Thus, equals should be treated equally and unequal to be treated unequally. Canon of Social Welfare :- It is very important principal of public expenditure. The particular form of induction which proceeds by comparison is frequently serviceable.
Public expenditure has the expansionary effect on the growth of national income, employment opportunities, etc. Whereas a fee is assessed as a payment for a special privilege. The financial significance of such a view is apparent. Tax payment is a personal obligation. The modern State, even when it allows an amount of individual liberty unknown in any former period, is obliged to employ complicated machinery for the regulation and management of its outlay and receipts. Edgeworth, as also in Sidgwick's works; and within the last year the subject of finance has been comprehensively reviewed in the concluding volume of Prof.
Another example is export subsidy given to export industries to boost our export to foreign countries. We are poor with the wealth and commerce of the whole world; and soon, by dint of having soldiers, we shall have nothing but soldiers, and be like the Tartars. The primitive theory of politics, if theory it can be called, accepted the omnipotence of the State as a leading principle. It is as certain as any prediction in social matters can be, that no reduction in the military budgets of Europe will soon be made; on the contrary, there is every probability that this form of expenditure will go on increasing in the future as it has done in the past. In this context, equity and economy is considered as the two guiding principle of taxation. The advocates of the mathematical method stand at the other extreme.
Is i there any distinction between home and foreign loans in respect to redemption? The deficit is made lip of public debts and other sources. The discussed objectives may change from time to time depending on the prevailing economic condition in an economy. It is a non-recurring type of expenditure. It helps to accelerate economic growth and ensure economic stability. For example, when an economy suffers from unemployment and deficiency of demand, the government should be capable of spending more to overcome this situation.
Principle of Balanced Budget: Every government must try to keep its budgets well balanced. If possible the expenditure should be kept less than the earnings of government. Military power had to be increased, and as the state revenues did not allow of an enlarged permanent force, the only alternative was that actually adopted, by which the whole effective male population became a reserve, and was yet enabled, in times of peace, to carry on its ordinary industrial pursuits. In the rudest forms of society each individual depends on his own resources. On the other hand, capital expenditure comprises expenditures incurred on social and community development, economic development, defence, general services, etc.
More particularly is this true at present in consequence of the great expansion of the functions of the State, which is partly due to—and which in turn increases—the complicated structure of modern societies. This is compulsory contribution levied in proportion to the special benefits derived, towards the cost of the improvement of property. This canon implies that public expenditure should be planned in such a way as to yield maximum social advantage and social welfare to the community as a whole and not to a particular group of the community. There should be systematic auditing and inspection procedures at the end of financial years to ensure accountability on the part of government officials vested with the power to expense. Every expenditure should be directed to achieve maximum social advantage to the community. Most French writers also exhibit a strong dislike to any financial measures believed to savour of socialism, e. If the income tax is not paid, the defaulter is made to pay a penalty, but the income itself is not made illegal.
In like manner, a writer on finance can sincerely lament that States spend too much; but his real task lies in showing how a State can obtain supplies, while treating the interests of individuals with due tenderness and respecting justice. It has now been realised that the expenditure on education and public health promotes the growth of what is called human capital which promotes economic growth as much as physical capital, if not more. In the following we shall spell out in detail the impact of public expenditure on production and income distribution in the economy. Public expenditure should only help to improve the production-distribution-exchange relationship in the economy. The cost of actual warfare presents problems very similar to those already considered.