of Public Finance:
Public finance, according to the traditional definition of the subject, is
that branch of Economics which deals with, the income and expenditure of a
government. In the words of Adam Smith:
Public finance is different from private finance.
Findlay Shiraz in his
famous book 'Principles of Public Finance' has listed the following points of
difference between government finance and private finance.
The classical economists did not attach much importance to
public expenditure. They advocated the policy of laissez-faire.
They held the view that government expenditure were apt to be
wasteful. They firmly believed that if money was left in the
private hands, it could bring better returns.
The government expenditure should be incurred in such a way that
it should give benefit to the community as a whole. The aim of
the public expenditure is the provision of maximum social
Public expenditure exercises a far-reaching influence upon the
national economy of a country. Its economic effects can be
viewed from two points:
The role of the state in economic affairs is a complex and controversial
topic. The political thinkers are divided about the extent and mode of state
interference in economic activity.
The activities undertaken by the modern state are complex and
varied. This is due to the fact that there is a strong demand by
the people for active state intervention in the social and
economic affairs of the country.