The basic nature of any economy lies in the scarcity of its productive resources in relation to its want. Our wants are ever increasing and recurring while availability of resources for satisfying them lags behind.
An economy is constantly engaged in the solution of this eternal problem of scarcity. It therefore, undertakes various activities where by the available supply of resources is augmented, existing supplies are utilized more effectively, and some additional objectives like stability, growth, and distribution etc are met with as fully as possible.
The division of economic activities between public and private sectors of the economy should not be a haphazard one, but should be based upon relevant economic and socio-political objectives and within the constraints of the country’s institutional framework.
Accordingly, in a capitalist economy the main task of providing goods and services is assigned to the private sector in which individual economic units are motivated by economic rationality and guided by the market mechanism in their decision making. The owners of factors of production are guided by the income which they earn in alternative employments, the investors are guided by the profitability of alternative investments; the consumers try to maximize their consumer surplus and so on. In a pure market economy, virtually all goods and services are supplied by the private firms for profit and all exchanges of goods and services takes place through markets, with prices determined by free interplay of supply and demand. Individuals would be able to purchase goods and services freely, according to their tastes and economic capacity( their income and wealth), given market determined prices.
Table of Contents
- UNIT 1: ECONOMIC ACTIVITIES AND THE STATE
- 1.1 INTRODUCTION
- 1.2 PUBLIC GOODS (SOCIAL GOODS) VS PRIVATE GOODS
- 1.3 THE SCOPE OF GOVERNMENT ACTIVITY
- UNIT 2: PUBLIC REVENUE
- 2.1 AIM OF THIS CHAPTER
- 2.2 DEFINITION OF A TAX
- 2.3 THE BASE OF A TAX
- 2.4 BUOYANCY AND ELASTICITY OF A TAX
- 2.5 PRINCIPLES OF TAXATION
- 2.6 CHARACTERISTICS OF A GOOD TAX SYSTEM
- 2.7 OBJECTIVES OF TAXATION
- 2.8 TAXABLE CAPACITY
- 2.9 THE INCIDENCES OF TAX
- UNIT 3: PUBLIC DEBT
- 3.1 MEANING OF PUBLIC DEBT
- 3.2 The unique characteristics of public debts as opposed to private debts.
- 3.3 TYPES OF PUBLIC DEBT
- 3.4 NEED FOR PUBLIC DEBT
- 3.5 EFFECTS OF PUBLIC DEBT
- 3.7 Management of public debt
- 3.8 Redemption of public debt
- 3.9 The role of public debt in economic development
- 3.10 Conclusion
- UNIT 4: PUBLIC EXPENDITURE
- 4.1 Meaning
- 4.2 THEORIES OF PUBLIC EXPENDITURE
- 4.3 OTHERS FACTORS WHICH CONTRIBUTE TO THE TENDENCY OF INCREASING PUBLIC EXPENDITURE IN A MODERN SOCIETY.
- 4.4 KINDS OF PUBLIC EXPENDITURE
- 4.6 CANONS OF EXPENDITURE
- 4.7 The effects of public expenditure.
- UNIT 5: THE PUBLIC BUDGET
- 5.1 Introduction
- 5.2 CHARACTERISTICS OF A GOOD BUDGET
- 5.3 CHALLENGES TO GOVERNMENT BUDGET
- 5.4 ECONOMIC AND FUNCTIONAL CLASSIFICATION OF BUDGET
- 5.5 CONCLUSION
- UNIT 6: ECONOMIC PLANNING
- 6.1 ECONOMIC PLANNING
- 6.2 Requisite for Successful Planning
- 6.3 Types Of Planning Models
- 6.4. Important Considerations In Choosing Planning Models.
- UNIT 7: FISCAL POLICY AND MONETARY POLICY
- 7.1 objectives of fiscal policy
- 7.2. fiscal policy for economic growth.
- 7.3. Compensatory fiscal policy
- 7.4. Conclusion
- 7.5. Monetary policy
- UNIT 8: PUBLIC UNDERTAKINGS / PUBLIC ENTERPRISES
- 8.1 there are two reasons for looking at public enterprise as part of the public sector management.
- 8.2 Kinds Of Public Enterprise
- 8.3 Hand transport and postal.
Objectives and Key Themes
This text aims to provide a comprehensive overview of public sector economics, exploring the various ways governments finance their activities and the impacts of these activities on the economy. It examines the principles and practices of taxation, public debt, public expenditure, and economic planning, within the context of both developed and developing economies.
- The role of the state in economic activity
- The principles and practice of taxation
- The management of public debt and its impact on economic development
- The effects of public expenditure on economic stability and growth
- Economic planning models and their application in developing countries
Chapter Summaries
UNIT 1: ECONOMIC ACTIVITIES AND THE STATE: This unit introduces the fundamental problem of scarcity and explores the division of economic activities between public and private sectors. It contrasts capitalist, socialist, and mixed economies, highlighting the roles of market mechanisms and government intervention. The unit then delves into the distinctions between public and private goods, emphasizing the concept of externalities and their impact on resource allocation. It concludes by examining the scope of government activity, considering both theoretical and historical perspectives and analyzing the trade-offs between government and private goods and services.
UNIT 2: PUBLIC REVENUE: This unit focuses on public revenue, primarily through taxation. It defines taxes, distinguishes them from other forms of government revenue, and examines the concept of the tax base. The unit explores the buoyancy and elasticity of taxes, outlining the principles of taxation (including Adam Smith's canons) and the characteristics of a good tax system. It further analyzes the objectives of taxation in developed and underdeveloped countries, considering the challenges of balancing revenue generation with economic stability and equity. The concept of taxable capacity and the incidence of taxes are also discussed.
UNIT 3: PUBLIC DEBT: This unit examines public debt as a means of financing government activities. It details the unique characteristics of public debt compared to private debt, including compulsion, repudiation, and interest rates. Different types of public debt are categorized (e.g., voluntary vs. compulsory, funded vs. unfunded, productive vs. unproductive). The unit explores the reasons for public debt, analyzing its effects on consumption, production, distribution, and prices. It also discusses the burden of public debt and its implications for future generations, concluding with methods of debt management and redemption.
UNIT 4: PUBLIC EXPENDITURE: This unit delves into the meaning and theories of public expenditure, including Wagner's law and the Wiseman-Peacock hypothesis. It examines factors contributing to the growth of public expenditure in modern societies and categorizes public expenditure (e.g., productive vs. unproductive, transfer vs. non-transfer). The unit outlines the canons of expenditure and analyzes the effects of public expenditure on economic stabilization, production, economic growth, and income distribution.
UNIT 5: THE PUBLIC BUDGET: This unit focuses on the public budget as a tool for planning and implementing government fiscal policy. It discusses the components of a budget, including revenue and expenditure estimates, and examines the characteristics of a good budget. The unit explores challenges faced in budget preparation and implementation, particularly in developing countries, and concludes with an explanation of economic and functional classifications of budgets.
UNIT 6: ECONOMIC PLANNING: This unit defines economic planning and examines the prerequisites for successful planning, including a planning commission, statistical data, clear objectives, and efficient administration. It discusses different types of planning models (aggregate growth models, sectoral projection models, and comprehensive inter-industry models), analyzing the factors to consider when selecting a model. The chapter concludes with an examination of the challenges and failures of development planning in many developing countries.
UNIT 7: FISCAL POLICY AND MONETARY POLICY: This unit explores fiscal and monetary policies as tools for economic stabilization and growth. It defines fiscal policy and outlines its objectives, including full employment, price stability, and economic growth. The unit explains compensatory fiscal policy, including built-in stabilizers and discretionary fiscal policy. It then turns to monetary policy, defining its objectives and instruments (bank rate, open market operations, reserve requirements, and selective credit controls). The unit concludes by contrasting expansionary and restrictive monetary policies.
UNIT 8: PUBLIC UNDERTAKINGS / PUBLIC ENTERPRISES: This unit examines public undertakings and public enterprises as part of public sector management. It analyzes the reasons for their existence, including market failures and the need for government intervention in specific industries. The unit categorizes different types of public enterprises (e.g., utilities, enterprises in competitive environments, and regulating authorities) and discusses the challenges of control and accountability inherent in their management. The unit also touches upon the ongoing debate surrounding privatization.
Keywords
Public sector economics, taxation, public debt, public expenditure, economic planning, fiscal policy, monetary policy, public enterprises, market failures, developing economies, economic growth, income distribution, stabilization policies.
Frequently Asked Questions: Public Sector Economics
What is the overall purpose of this text?
This text offers a comprehensive overview of public sector economics, examining how governments fund their operations and the economic effects of these actions. It delves into taxation, public debt, expenditure, and economic planning, considering both developed and developing economies.
What topics are covered in Unit 1: Economic Activities and the State?
Unit 1 introduces the concept of scarcity and the division of economic activity between the public and private sectors. It compares capitalist, socialist, and mixed economies, discussing market mechanisms and government intervention. The unit defines public and private goods, explains externalities, and explores the scope of government activity.
What does Unit 2: Public Revenue cover?
Unit 2 focuses on public revenue, mainly through taxation. It defines taxes, discusses tax bases, buoyancy, and elasticity. It outlines principles of taxation, characteristics of good tax systems, and the objectives of taxation in different economic contexts. Taxable capacity and tax incidence are also addressed.
What are the key themes of Unit 3: Public Debt?
Unit 3 examines public debt as a financing mechanism for government activities. It differentiates public and private debt, categorizes types of public debt, explores reasons for incurring debt, and analyzes its effects on the economy. Debt management, redemption, and the role of debt in economic development are also discussed.
What is the focus of Unit 4: Public Expenditure?
Unit 4 explores the meaning and theories of public expenditure (including Wagner's Law and the Wiseman-Peacock hypothesis). It examines factors driving expenditure growth, categorizes types of expenditure, and discusses the canons of expenditure. The unit analyzes the effects of public expenditure on economic stability, production, growth, and income distribution.
What does Unit 5: The Public Budget cover?
Unit 5 focuses on the public budget as a tool for fiscal policy. It discusses budget components, characteristics of a good budget, challenges in budget preparation and implementation, and economic and functional budget classifications.
What are the main points of Unit 6: Economic Planning?
Unit 6 defines economic planning and the prerequisites for success. It discusses different planning models (aggregate growth, sectoral projection, and inter-industry models) and the factors to consider when choosing a model. The challenges and failures of development planning are also examined.
What topics are included in Unit 7: Fiscal Policy and Monetary Policy?
Unit 7 explores fiscal and monetary policies for economic stabilization and growth. It defines fiscal policy, outlines its objectives, explains compensatory fiscal policy, and discusses monetary policy objectives and instruments (bank rate, open market operations, reserve requirements, selective credit controls). Expansionary and restrictive policies are contrasted.
What is covered in Unit 8: Public Undertakings / Public Enterprises?
Unit 8 examines public undertakings and enterprises within public sector management. It analyzes reasons for their existence, categorizes types of enterprises, and discusses challenges of control and accountability. The ongoing debate surrounding privatization is also touched upon.
What are the key objectives and themes of the entire text?
The text aims to provide a comprehensive understanding of public sector economics, focusing on the state's role in economic activity, the principles and practice of taxation, public debt management and its impact, the effects of public expenditure, and the application of economic planning models, particularly in developing countries.
What are the key words associated with this text?
Key words include public sector economics, taxation, public debt, public expenditure, economic planning, fiscal policy, monetary policy, public enterprises, market failures, developing economies, economic growth, income distribution, and stabilization policies.
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- Professor Nicholas Sunday (Autor), 2013, Economic Activities and the State, Múnich, GRIN Verlag, https://www.grin.com/document/209298
