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Home Principles of Public Finance Public Finance Vs Private Finance


Public Finance Versus Private Finance:


Difference Between Public Finance and Private Finance:


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.


(i) Adjustment of Income and expenditure. An individual usually adjusts his expenditure to his income. But the public authority generally adjusts its income to its expenditure. In other words, we can say that an individual cuts his coat according to his cloth. While the public authority first decides the size of the coat and then tries to procure cloth according to the size of its coat. The public authority prepares an estimate of the total expenditure to be incurred during a fiscal year and then devises ways and means to raise the required amount. The individual, on the other hand, tries to live within his own means. His expenditure is generally determined by his income.


(ii) Unit of time. The public authority balances its budget during a given period which is generally a year. For an individual, there is no period of time in the course of which the budget must be balanced. The individual generally continues earning and spending without keeping any record-of his budget by a particular date. The public authority, however, has to keep full records of its income and expenditure and the accounts are to be in balance during the financial year.


(iii) An Individual cannot borrow from himself. If at any time an individual is

in need of money, he cannot borrow from himself. He can raise me loan from other individuals or can utilize his past savings, but he cannot borrow internally. The public authority, on the other hand, can borrow internally from its own people and externally from other nations.


(iv) Issue of currency? Government has full control over the issue of currency in the country. No other person except the stale can print notes. If an individual floes so, be will be put behind the bars.


(v) Provision for the future. The government has to make a solid provision for the future. It spends large amounts of money on those projects which the future generation is only to benefit. The individuals, on the other hand, are not generally liberal and far sighted. They discount the future at a higher rate and so usually make inadequate provision for the future.


(vi) Big and deliberate changes in public finance. It, is easier for the government to make big and deliberate changes in its income, and expenditure but for an individual it is a very difficult affair. A few individuals may succeed in increasing their incomes but all the persons cannot do so. The public authority can also make deliberate decrease in its income without feeling any difficulty. But for individuals, reduction in income is very painful as they are used to certain standard of living.


(vii) Surplus budgeting. For an individual, excess of income over expenditure

or surplus budgeting is considered to be a virtue but for the public authority it is not as such, it is expected from the government that it should raise only as much revenue as it needs during a calendar year. After all what is the fun of showing persistently surplus budgets. It is not better to give relief to the tax-payer; than to show surplus budgets?


(viii) Mystery shrouds Individual Finance. Individual's finance is usually shrouded in mystery. Everybody likes that his financial position should 1 remain a closely guarded secret but this is not the case with public authorities. The government publishes its budget and gives due publicity to it.

Relevant Articles:

Public Finance
Public Finance Versus Private Finance
Public Expenditure
Principles of Public Expenditure
Public Expenditure and National Income
Role of State in Economic Activity
Functions of Modern State

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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