Adolf Wagner's theory of INCREASING STATE ACTIVITIES

                Adolf Wagner's theory of INCREASING STATE ACTIVITIES

Introduction:-
Adolf Wagner, the German economists made an in depth analysis relative to the rise in govt. expenditure in the late 19th century. Based on his study he propounded a low called, "The low of increasing state activity."
Explanation of the theory:-
 Wagner's low states that 'as the economy develops over time, the activities and functions of the govt. increase.'
According to Adolf Wagner, "Comprehensive comparisons of different countries and different times show that among progressive people(societies), with which along we are concerned- an increase regularly takes place in the activity of both the central govt. and local govts. constantly undertakes new functions, while they perform both old and new functions more efficiently and more completely. In this way, economic needs of the people are in an increasing extent and in a more satisfactory fashion are satisfied by the central and local govts."

WAGNER'S STATEMENT INDICATES THE FOLLOWING POINTS

1. In progressive societies, the activities of the central and local govt. increase on a regular basis.
2. The increase in govt. activities is in both extensive and intensive.
3. The govt. undertake new functions in the interest of the society.
4. The old and new functions are performed more efficiently and more completely than before.
5.The purpose of the govt. activities is to meet economic needs of the people.
6. The expansion and intensification of governmental function lead to increase in public expenditure. 

Theory of Maximum Social Advantage

                                         Theory of Maximum Social Advantage
Introduction: This formula was put forward by the British economist, Hugh Daltotn. According to him, that system of public finance is the best which secures maximum social advantage to the community. The fiscal operation of the state should therefore be determined by the principle  of maximum social advantage.
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Assumptions:
1.All taxes result in sacrifice and all public expenditures lead to benefit.
2. Public revenue consist of only taxes and there is no other source of income to the government.
3. The govt. has no surplus or deficit budget but only a balanced budget.

THE THEORY: Taxation leads to some loss of purchasing power by the taxed people. This is the social sacrifice of taxation. Likewise, the spending of money by the state leads to gain of utility by those who are benefited by it. This is the social benefit of public expenditure.
State should continue with it's fiscal operations so long as the social benefit exceeds the social sacrifice, because thereby the community will be the net gainer. The state shall  be maximsing  the net social advantage by continuing with it's fiscal operations. But the state should not proceed beyond the point where the social sacrifice equals the the social benefit. In case it does so, the net social advantage shall  be less than the maximum. The net social advantage shall be maximum only at the point where the social sacrifice equals the social benefit.
Introducing the concept of margin on both sides,the state should secure maximum social advantage by equating the marginal social sacrifice (involved in taxation) with the marginal social benefit (flowing from public expenditure). The point of equality between the marginal social sacrifice and the marginal social benefit is known as the point of maximum social advantage or the point of least aggregate social sacrifice.

Diogramatical Explanation


In the above diagram, MSS is the marginal social sacrifice curve sloping upward from left to right. This rising curve indicates that the marginal social sacrifice goes on increasing with every additional dose of taxation.   MSB is the marginal social benefit curve sloping downwards from the left to right. This falling curve indicates that the marginal social benefit diminishes with every additional dose of public expenditure. The two curves MSS and MSB intersect each other at the point P. PM represents both marginal social sacrifice as well as marginal social benefit. Both are equal at OM which represents the maximum social advantage.

Criticism:-

1. Non measurability of social sacrifice and social benefit:-
The major drawback of this principle is that it is not possible in actual practice to measure the MSS and MSB involved in the fiscal operation of the state.
2. Non applicability of the low of equimarginal utility in public expenditure:-
The low of equimarginal utility may be applicable to private expenditure but certainly not to public expenditure.
3.All taxes don't result in sacrifice and all public expenditures donot lead to benefit.
4. Public revenue don't consist only of taxes and there is other source of income also to the government.
4. "The govt. has no surplus or deficit budget but only a balanced budget."- is an invalid assumption.

Summing up:-
Despite of all the limitations, the theory of maximum social advantage has been occupying an important place in economics as a leading theory of public finance.

Market Economy and Public Sector

                                        Market Economy and Public Sector


What is market economy?
A market economy or  free market economy is an economic system in which the production and distribution of goods and services take place through the mechanism of free market guided by a free price system. In a market economy, businessmen and consumer will decide what to produce, how much to produce, what to change customers for their products, what to pay employees.  What to consume, how much to consume and at what price- all these are influenced by the pressure of completion, supply and demand. In real world, there is no nation that has a pure market economy.

Public sector:

Public sectors refer to those economic sectors which are controlled, owned and operated by the government. 

Problems faced by Public sector in the expansion of Market Economy:-

Public sector carries socialistic characteristics whereas market economy carries capitalistic characteristics. So, obviously conflict arises between market economy and public sector.
Sometimes public sector seems to have certain capitalistic characteristics in a market economy. In such a situation, public sector has to conflict with private sector. As a result, public sector has to sacrifice its socialistic characteristic and social obligations.
The objective of market economy is to maximize profit whereas the objective of public sector is to ensure maximum social welfare. Therefore the existence of market economy limits the scope of public sector in fulfilling its objectives specially when certain goods and services are produced by public sector and the task of distribution is entrusted to market economy.

Dose the Expansion of Market Economy reduces the Scope of Public Sector?
1stly the government makes provision for health, sanitation, education, transport etc. to bring about welfare of the people. In this way, the government acts as a provider. Secondly, the government  tries to facilitate the expansion of private sector by creating infrastructural development . Without infrastructure, expansion of private sector is not possible. For example, development of industry with private initiative needs proper transport, communication system power etc. Therefore by providing such infrastructure, the government paves the way of expansion of private sector. Thirdly, the government undertakes regulatory measures so that economic welfare and stability- both are maintained properly. As a government performs the tasks of provider, facilitator and regulator in most of the countries of the world, therefore it can be concluded that the expansion of market economy doesn't reduce the scope of public sector as well  as the scope of  public finance.

Scope of Public Finance

                                                       Scope of Public Finance



The scope of public finance includes the following.

1. Public Revenue
In this branch, we study all those sources from which the government derives its revenues
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2. Public expenditure
Here we study the main principle of public expenditure. Along with that, we also study all those ways and means through which the government keeps check on its expenditure.

3. Public debt
The government expenditure often exceeds government income in abnormal times. To meet the deficit in the budget, the government borrows from the public. Modern governments also borrow from the public to promote the economic development of the country.

4. Financial administration
In this branch, we study such important subjects as the financial management by the government, the preparation of the budget and its final acceptance by the legislature. We also study here how the government keeps a check on its expenditure through auditing of accounts etc.                   

Control of Public Expenditure

The necessity to control public expenditure in order to check misuse of public funds. The most important means of control are as follows -----

1)Budgetary Control:- Budgetary preparation is most primary stage of control of expenditure. Budget is well thought-out plan of governmental activities during the coming year. How much of the public funds are to be spent for which particular activities, which particular department, what should be the allocation of public funds for the use of particular department are all specified in the budget frame.

2)Legislature Control:- After the budget preparation it has to be presented in the legislature for its approval. There occurs debate in the legislature where the members seek clarification and justification of expenditure programs. After the critical study expenditures estimated originally may be enhanced or kept  unchanged according to the merit of the case.

3)Administrative Control:- The rules and regulation ensure that no amount is spent without proper sanction to same other purpose for which it is not sanctioned. There is a elaborate body of rules to fix responsibility on specific executive personnel for the funds spent.

4)Audit Control:-  The next step is scrutiny of the accounts and audit control. Every department has its accounts section which scrutinizes all accounts of  expenditure and ensure that public funds are spent according to rules of property, economy and efficient utilization.

Forms of Public Enterprises

There are four main types of public enterprises. These are discussed below.

1.Departmental form of public sector : Some public enterprises run departmentally. They are kept under an appropriate department of the govt. ,financed out of the funds allotted to the department by the legislature and are managed by civil servants belonging to that department. There are some main characteristics of this type.

a) The departmental form of P.E. is an oldest form of public enterprise.

b) The function is responsible to the government.

2. Company form of public enterprises  :- The second form of organization set up of public enterprise is that of joint stock company in its various forms. The company form of organization has been the most popular form for obvious reason. E.g. coal India Limited, Steel Authority of India are the example of company form of public enterprises.

3.Public Corporation :-Public Corporation may be defined as a legal entity created by the govt. but exterior to the govt. organization, hence financially independent for the purpose of carrying on the specified activities in a manner prescribed in the low creating it. According to Herbert Morrison, ‘’Public Corporation is a combination of public ownership, public accountability and business management for public ends.’’ E.g. ONGC, OIL etc..

4.Joint Sector :-Joint sector refers to that organization where the government and public sector works jointly. In such enterprises, the combination of capital provided by the govt. and the management technique is co-exist. The day to day activities of this enterprises are carried out by the board of directors.

  Meaning of  Public Utilities ( ৰাজহুৱা উপযোগী সেৱা )

      ৰাজহুৱা উপযোগী সেৱা বুলিলে এনে কিছুমান সেৱাক বুজায় , যিবোৰ সামাজিক স্বাৰ্থ পূৰণৰ বাবে চৰকাৰে যোগান ধৰে ৷ যেনে :- পানী যোগান ,বিদ্যুৎ যোগান , পৰিবহন ,যোগাযোগ ইত্যাদি ৷এনে সেৱাৰ যোগান জনসাধাৰণৰ কল্যাণৰ দিশৰ পৰা ইমানেই গুৰুত্বপূৰ্ণ যে এইবোৰৰ যোগানৰ ক্ষেত্ৰত প্ৰতিযোগিতাৰ উপস্থিতি জনসাধাৰণৰ কাৰণে মংগলজনক নহয় ৷

Characteristics of Public Utilities services-

1)      প্ৰয়োজনীয় সেৱা :-

       এনে সেৱাই মানুহৰ কিছুমান মৌলিক অভাৱ ,যেনে: পানী যোগান, পোহৰ, পৰিবহন,যোগাযোগ ইত্যাদি পূৰণ কৰে ৷ এনে সেৱা কোনো বিভেদ নকৰাকৈ অতি সূলভ মূল্যত প্ৰদান কৰা হয় ৷

2)      স্বাভাবিক একচেটিয়া ব্যৱসায় :-

    ৰাজহুৱা উপযোগী সেৱা সমূহৰ অধিকাংশ স্বাভাৱিক একচেটিয়া ব্যৱসায়ৰ অৰ্ন্তভূক্ত হয় ৷ নূন্যতম ব্যয়ত উচ্চ মানদণ্ডৰ সেৱা যোগানৰ উদ্দেশ্য আৰু ক্ৰমহ্ৰাসমান ব্যয়ৰ বাবে এনে সেৱাৰ  ক্ষেত্ৰত প্ৰতিযোগিতামূলক বজাৰ উদ্ভৱ নহয় ৷

3)       অবিৰত  চাহিদা :-

    পানী যোগান ,বিদ্যুৎ যোগান ,যোগাযোগ আদিৰ দৰে ৰাজহুৱা উপযোগী সেৱা সমূহৰ চাহিদা অবিৰত ৷

4)      অহস্তান্তৰযোগ্য :-

    ৰাজহুৱা উপযোগী সেৱাসমূহ হস্তান্তৰ যোগ্য নহয় ৷অৰ্থ্যাৎ এজন ক্ৰেতাই ৰাজহুৱা উপযোগী সেৱাৰ প্ৰতি তেওঁৰ চাহিদা এজন বিক্ৰেতাৰ পৰা আন এজনলৈ হস্তান্তৰ কৰিব নোৱাৰে ৷

5)      নিম্ন বাৰ্ষিক প্ৰতিদান :-

   অন্য ব্যৱসায়ৰ তুলনাত ৰাজহুৱা উপযোগী প্ৰতিষ্ঠান বোৰৰ বাৰ্ষিক প্ৰতিদান সাধাৰণতে কম হয়৷এনে প্ৰতিষ্ঠানে প্ৰয়োজনীয় সেৱাসমূহ সূ্লভ মূল্যত আগবঢ়োৱা বাবে  প্ৰতিষ্ঠানটোত মুঠ মূলধন বিনিয়োগতকৈ বাৰ্ষিক  মুঠ বিক্ৰী আয় কম হয় ৷

Objectives of Public Utility Services –

1)      সৰ্বতোপ্ৰকাৰে উদ্যোগ স্থাপনত সহায় কৰা ৷

2)      উদ্যোগ স্হাপনত বৃহৎ পৰিমানৰ বিনিয়োগ ৷

3)      জনসাধাৰণৰ সামূহিক অভাৱ দূৰীকৰণ ৷

4)       সম অৰ্থনৈতিক বিকাশ ৷

5)      অৰ্থনৈতিক শক্তিৰ কেন্দ্ৰীকৰণত বাধা ৷

6)      চৰকাৰী আঁচনিৰ কাৰ্যকৰীকৰণত সহায় ৷ ইত্যাদি৷

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PUBLIC FINANCE

                                        

Govt. of every country has to perform certain activities which can broadly be classified under two headings namely obligatory and optional. Maintenance of peace and liberty and sovereignty are some of the obligatory functions while provision of educational facility, medical facilities etc. are some of the optional functions. To perform all these functions efficiently and adequately, govt. needs a huge fund of money. Public finance basically concerns with studying the source and maintenance of govt. funds. Therefore the main scope of public finance is public revenue, public expenditure, public debt and financial administration. 

Characteristics of Public Enterprises ( ৰাজহুৱা খণ্ডৰ উদ্যোগৰ বৈশিষ্ট্য )

1)      চৰকাৰৰ দ্বাৰা বিত্তৰ যোগান  :-

     ৰাজহুৱা খণ্ডৰ উদ্যোগসমূহলৈ সাধাৰণতে চৰকাৰে বিত্তৰ যোগান ধৰে ৷

2)      চৰকাৰৰ পৰিচালনা :-

     ৰাজহুৱা খণ্ডৰ উদ্যোগসমূহ চৰকাৰে পৰিচালনা কৰে ৷এনে উদ্যোগসমূহ পৰিচালনাৰ বাবে চৰকাৰে বিশেষ পৰিচালনা সমিতি গঠন কৰিব পাৰে ৷

3)      বিত্তীয় স্বতন্ত্ৰতা :-

      যদিও ৰাজহুৱা উদ্যোগবোৰত চৰকাৰে বিনিয়োগ কৰে তথাপিও এনে উদ্যোগবোৰ বিত্তীয় ক্ষেত্ৰত স্বতন্ত্ৰ হয় ৷ দৈনন্দিন প্ৰয়োজনীয়তাৰ বাবে এনে উদ্যোগ চৰকাৰৰ ওপৰত নিৰ্ভৰশীল নহয় ৷

4)      ৰাজহুৱা সেৱা :-

     ৰাজহুৱা উদ্যোগ সামাজিক সেৱাৰ উদ্দেশ্যৰ দ্বাৰা পৰিচালিত হয় ৷ এনে উদ্যোগৰ মূখ্য উদ্দেশ্য হৈছে সামাজিক সেৱা আগবঢ়োৱা ৷

5)      একচেটীয়া ব্যৱসায় :-

    কিছুমান ক্ষেত্ৰত  ৰাজহুৱা উদ্যোগে একচেটীয়া ব্যৱসায় কৰে ৷যেনে :- ভাৰতীয় ৰে’ল  ৷এনে ক্ষেত্ৰবোৰত ব্যক্তিগত খণ্ডক সোমাবলৈ অনুমতি দিয়া নহয় ৷

6)           ৰাজহুৱা খণ্ডৰ উদ্যোগে চৰকাৰী পৰিকল্পনা কাৰ্যকৰীকৰণত সহায় কৰে  ৷

 Public enterprise (ৰাজহুৱা উদ্যোগ)

   যিবোৰ উদ্যোগৰ মালিকীস্বত্ব আৰু পৰিচালনাৰ দায়িত্ব সম্পূৰ্ণৰুপে বা আংশিকভাৱে চৰকাৰৰ হাতত থাকে তেনেবোৰ উদ্যোগকে ৰাজহুৱা উদ্যোগ বোলে ৷এখন দেশৰ দৰিদ্ৰতা ,নিৱনুৱা সমস্যা আৰু ঔদ্যোগিক অনগ্ৰসৰতা দূৰ কৰাৰ লগতে মূলধন গঠনতো সহায় কৰি ৰাজহুৱা উদ্যোগ খণ্ডই অৰ্থনৈতিক বিকাশৰ গতি  ক্ষীপ্ৰ কৰিব পাৰে ৷

     A.H. Hansen –ৰ মতে , “ Public enterprise means state ownership and operation of industrial,agricultural,financial and commercial understandings .”

     N.N Mallya ৰ মতে , “ ৰাজহুৱা উদ্যোগ হ’ল, ৰাষ্ট্ৰৰ দ্বাৰা নিয়ন্ত্ৰিত ঔদ্যোগিক  আৰু বাণিজ্যিক কাৰ্যৰ লগত জড়িত স্বতন্ত্ৰ বা অৰ্ধস্বতন্ত্ৰ নিগম বা কোম্পানী ৷”

what is Deflation { মুদ্ৰা সংকোচন কি ? }

    ই মুদ্ৰাস্ফীতিৰ বিপৰীত অৱস্থা ৷ অৰ্থ্যাৎ, মুদ্ৰা সংকোচন হৈছে এনে এক অৱস্থা যিটো অৱস্থাত অৰ্থনীতি এখনত মুদ্ৰাৰ মূল্য বৃদ্ধি পায় আনহাতে দৰস্তৰ হ্ৰাস পায় ৷

    অৰ্থনীতিবিদ পিগুৰ মতে উৎপাদিত দ্ৰব্য আৰু সেৱাৰ পৰিমান মুদ্ৰা আয়ৰ তুলনাত অধিক হ’লে মুদ্ৰা সংকোচন ঘটে ৷

   মুদ্ৰা সংকোচনৰ প্ৰধান বৈশিষ্ট্যসমূহ হ’ল-

        ক] মুদ্ৰা আয়ৰ পৰিমানতকৈ প্ৰকৃত উৎপাদন বেছি হয় ৷

        খ] বজাৰত মুদ্ৰাৰ চাহিদাতকৈ মুদ্ৰাৰ পৰিমাণ কম থাকে ৷

        গ] দ্ৰব্য সামগ্ৰীৰ চাহিদাতকৈ যোগান বেছি থাকে৷

Net Indirect Tex(NIT)

Net Indirect Tex refers to the difference between indirect taxes and subsidies. i.e.

                   NIT=Indirect Taxes - Subsidies.

The concept of NIT is very important to differenciate between factor cost and market  price of a commodity.

Therefore,

               Market Price= factor cost + NIT

               Factor Cost= Market Price - NIT.

Net Factor Income from Abroad(NFIA)

NFIA refers to difference between factor income received from the rest of the world (ROW) and factor income paid to the rest of the world. i.e.

                    NFIA= Factor income earned from abroad - factor income paid to the abroad.

NFIA is significant to differenciate between domestic income and national income. i.e.

                     National Income(NI)=Domestic income + NFIA.

                     Domestic income =National income - NFIA .

 

what is Inflation ( মুদ্ৰাস্ফীতি কি ? )

   সাধাৰণ অৰ্থত মুদ্ৰাস্ফীতি বুলিলে আমি দৰ বৃদ্ধি হোৱাকে বুজোঁ ৷ অলপ বহল অৰ্থত ক’বলৈ গলে মুদ্ৰাস্ফীতি হৈছে এনে এক অৱস্থা, যি অৱস্থাত অৰ্থনীতি এখনত স্থায়ী আৰু অবিৰতভাৱে মূল্যস্তৰ বৃদ্ধি হয় আৰু মূদ্ৰাৰ মূল্যৰ অৱনতি ঘটে ৷ মুদ্ৰাস্ফীতি সম্পৰ্কত বিভিন্ন অৰ্থনীতিবিদে বিভিনন ধৰণৰ সংজ্ঞা দাঙি ধৰিছে –

   

    অধ্যাপক Coulbourn ৰ মতে, “Inflation is a situation of too much money chasing too few goods.”

       

     অধ্যাপক  Crowther য়ে কৈছে যে , “ Inflation is a state in which the value of money is falling i.e. prices rising.”

        

     অন্য এজন বিশিষ্ট অৰ্থনীতিবিদ Gregory ৰ মতে , “ Inflation is a state of abnormal increasing the quantity of purchasing power .”

    

     মুদ্ৰাস্ফীতি প্ৰধানকৈ এক মৌদ্ৰিক বিষয় ৷ ইয়াৰ প্ৰধান লক্ষণ হৈছে অবিৰত আৰু উল্লেখযোগ্যভাৱে বৃদ্ধি পোৱা মূল্যস্তৰ ৷ বৰ্তমান সময়ত মূদ্ৰাস্ফীতি পৃথিৱীৰ প্ৰায়বোৰ দেশৰ অৰ্থনীতিৰে এক প্ৰধানতম সমস্যা হৈ পৰিছে ৷