Management Accounting FAT-2

Name: - Ladani Shrey Dharmendrabhai

Second Year BBA(General)
Division – B
Roll Number – 126
PRN - 1062210628

PUBLIC FINANCE
Topic – Public Finance
Authors – Harvey S. Rosen

Literature Review: -
1.Scope of the Field:
The term public finance is a misnomer, because the fundamental issues are not
financial but rather the use of real resources. Modern public finance focuses
on the microeconomic functions of government, how they do and should affect
the allocation of resources and the distribution of income. Some practitioners
prefer the label public sector economics or simply public economics.

2. Methodological Basis:
The framework for public finance is provided by mainstream economic theory,
yet it would not be unreasonable to consider it to be an application of
microeconomics. According to welfare economics, an economy may allocate
resources in a Pareto-efficient manner without the help of the government.
Free enterprise systems are incredibly effective in producing goods and
services.
3. Public Expenditure:
According to welfare economics theory, the two main justifications for
considering state intervention are market failure and distributive issues. A
public product has two features: once it is offered, there is no additional cost
for another individual to use it; this is known as nonrival consumption. A
private good, such as food, on the other hand, is both competitive and
excludable.

4.Externalities:
In the presence of an externality, there are a variety of ways that government
action may improve efficiency. In general, command-and-control strategies are
used by the majority of nations to address environmental issues. However,
market-oriented strategies have made some strides in recent years in tackling
such problems.

5. Social Insurance:
In the event of specific unlucky circumstances, consumers pay premiums for
private insurance and receive benefits; in government programmes, income
losses are replaced with benefits. There are arguments in favour of the idea
that private insurance markets won't function effectively. Social insurance
essentially overcomes this issue by bundling everyone into the nation as a
whole.

6. Conclusion: -
The field of economics known as public finance investigates how the
government collects taxes and spends money. The phrase is rather misleading
because the main difficulties are not financial (i.e., involving money), but
rather have to do with how actual resources are used. The terms public sector
economics or just public economics are preferred by certain practitioners.
Citation / Bibliography: -
Rosen (2002) Public Finance, The Encyclopedia of Public Choice. Springer.
Springer, Boston, MA. Available at:
https://www.citethisforme.com/cite/sources/websitemanualcite (Accessed:
November 7, 2022).