Professional Documents
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Week 1 Introduction
Week 1 Introduction
Fahmida Sultana
Associate Professor
Department of Development Studies
University of Dhaka
Lecture Outline
•Some Basic Questions
•Examples of Some Government Activities
•Definition of Public Finance
•Emergence of Public Finance as a Separate
Branch
•Subject Matter of Public Finance
•Scope and Limitations of Public Finance
Some Basic Questions
• What we eat and drink, where we can live and what kinds of
houses we can live in are all regulated by government agencies
• We travel on public roads, we use public transports, our
garbage collection and sewage disposal by government sector
• Legal structures to sign contracts and so on
• Environmental regulations to control pollution
• Safety regulations
Definition of Public Finance
•Related with financing of state activities
• To protect the society against any foreign aggression that might take place
• Without public sector , essential social overheads would not come into
existence
Subject Matter of Public Finance
We have four major divisions (traditionally set) in the
study of Public Finance:
• 1. Public Revenue, which deals with the method of raising funds and the
principles of taxation. Thus, within the purview of public revenue, we take
up the classification of public revenue, canons and justification of taxation,
the problem of incidence and shifting of taxes, effects of taxation, etc.
• Since market mechanism fails in case of public goods because of the failure
of forcing the users to reveal their demand preferences, free riders problems
are very much likely to be faced by the suppliers.
Scope and Limitations of Public
Finance
Limitations
• Lack of enough resources
• The boundaries of the government activities depend upon the political and
social acceptability of its policies
Basic References
• Stiglitz
• Rosen
• Bhatia