WISEMAN PEACOCK HYPOTHESES

 Peacock and Wiseman conducted a new study based on Wagner's low. They studied the public expenditure from 1891 to 1955 in UK. They found out that Wagner's low is still valid. According to this hypothesis, the increase in public expenditure doesn't follow any smooth and continuous trend but the increase in public expenditure occurred in step like manner. However, the approach of the hypotheses is made of three separate concepts.

1. Displacement effect

2. Inspection effect and

3. Concentration effect.

1 DISPLACEMENT EFFECT:-

During the time of war, the govt. further increases the tax rates and enlarges the tax structure to generate more funds to meet the increase in the defense expenditure. After the war the new tax rate or tax structures may remain the same, as the people get used to them. Therefore the increase in revenue results in rise in govt. expenditure.

2. INSPECTION EFFECT:-

In the situation of kinky movement of public expenditure, the govt's existing revenue earning falls much short and so this requires a upward revision of revenue mobilization and a review of the situation is made both by the government and the tax paying public. Such review is referred to as inspection effect.

3. CONCENTRATION EFFECT

With the kinky rise in the public expenditure it is the central government that comes to fulfill larger and larger state activities leaving lesser responsibilities to the regional and local public authorities. This has been referred as to concentration effect of increasing state activities.

In short, Peacock Wiseman thesis of govt. spending trend is more convincing than Wagner's hypotheses.