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Public expenditure is spending made by the government of a country on collective or individual needs and wants of public goods and public services, such as pension, healthcare, security, education subsidies, emergency services, infrastructure, etc. [6] Until the 19th century, public expenditure was limited due to laissez faire philosophies.
Wagner's law, also known as the law of increasing [a] state activity, [2] is the observation that public expenditure increases as national income rises. [3] It is named after the German economist Adolph Wagner (1835–1917), who first observed the effect in his own country and then for other countries.
The advantage of the benefit theory is the direct correlation between revenue and expenditure in a budget. It approximates market behaviour in the allocation procedures of the public sector. Although simple in its application, the benefit theory has difficulties: [ 9 ]
Public Finance in Theory and Practice, McGraw-Hill. Richard A. Musgrave and Alan T. Peacock, ed. ([1958] 1994). Classics in the Theory of Public Finance, Palgrave Macmillan. Description and contents. Edwin J. Perkins, American public finance and financial services, 1700-1815 (1994) pp 324–48. Complete text line free; Joseph E. Stiglitz (2000).
The accountant's perspective focuses on the accountability value in budgeting which analyzes the amount budgeted to the actual expenditures thereby describing the "wisdom of the original policy". [1] Smith and Lynch's public manager's perspective on a budget is a policy tool to describe the implementation of public policy. Further, they develop ...
Public economics (or economics of the public sector) is the study of government policy through the lens of economic efficiency and equity.Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social welfare.
Budget theory is the academic study of political and social motivations behind government and civil society budgeting. Classic theorists in Public Budgeting include Henry Adams , William F. Willoughby , V. O. Key, Jr. , and, more recently, Aaron Wildavsky .
The Henry George theorem states that under certain conditions, aggregate spending by government on public goods will increase aggregate rent based on land value (land rent) more than that amount, with the benefit of the last marginal investment equaling its cost. The theory is named for 19th century U.S. political economist and activist Henry ...