SOCiety.

allTherefore,
Wagner which constitutes it
uch type of
deals with thetheories
Tology must be evolved
must consider cultural
sector during the course of the primary casual conditions described by
2. Not
industrialisation determinants
and of a relatively
expanding public
framework.
ComprehensivetheAnalysis. Althougheconomic growth.
accumulating and explaining crucial historical facts,Wagner'
it lackss ahypothesis possesses the
3. Not
AeterminingAcceptable
theory the
of
to Western
Countries, Wagner's
comprehensive analytical
countries. state which is not, version
is
at least based on inan organic
4. It Ignores the however, accepted selt
most western
on governmene's Influences of War.
activities whichWagner'
modern times. spending play sa hypothcsis
vital role inignores the
the publicinfluence war
of
2. PEACOCK-WISEMAN HYPOTHESIS expenditure
This
Wiseman hypothesis
of
in the study ofhepublic
grawAh-af public expenditure was advanced by
It stresses the tinme pattern of expenditure in Great Britain during the Peacock and Jack
in public expenditure does notpublic spending trends»and highlights the factperiod that
1890-1955
follow any
public expenditure occurred in step-like smooth the
and contiauous trend but the increase
other disturbance takes place which manner or in jerks. Durtng this phase, someincrease in
public revenue could not meet the shows the need of increased expenditure as the social ßr
existing
However, the approach of thesituation.
hypothesis is made of three separate concepts :
1. Displacement effect
2. Inspection effect 3. Concentration effect
Peacock and Wiseman observed that the relative growth of
Great Bntain tolloweda chscrete step-ike pattern the public sector in the
The government's fiscal activities have rather than a Continuous growth paten.
during the span of seven decades. Most risen step by step to successive
of the upward steps in taxing and new higher level
taken place during
period of major social disturbances. This has created aspending have
displacement
effect by which the previous lower tax and expenditure are
replaced
budgetary levels. After the social disturbance has ended, the newly emerged andby new higher
level
tolerance makes the society willing to support a higher level of public expenditure since of tax
society realises that they are capable of carrying a the
heavier tax burden than it
was. In this way, the public expenditure and revenue get stabilised at a new levelpreviously
and still
another disturbance occurs to cause a displacement effect. Thus, the social disturbance ends
that no strong motivation exists which may compel the society to return to the old lower
level of taxation. The higher government revenues are used, instead, tosupport a
higher level of public sector allocation. permanently
1. A.T. Peacock and Jack Wiseman, The Growth of Public Expenditure in United Kingdom:.
92 PUBLIC FINANCE
lhusd1splavement effect does not require the new higher growth of expenditure should
ntunue wth the same expenditure pattern that was created by the social disturbance. la
this way. the increased expenditures are partly direct result of disturbance while othor
Cnditures frequently involve the expansion of government into new areas of
t h Eor 4stane, war and other seeial disturbanees frequently-force people andeconomic
their
gmment to tind out the solution of problems which previously had been neglected. This
Is AnOWn as inspection effect'.
Thirdlv. Peacock and Wiseman also described a concentration effect which refers to the
angarent tendency for central government economicactivity to grow faster tharn that of the
State and local governments when a society is experiencing economic growth. Actually,
02entration effect is closely related with the political set up of the country.
In short, Peacock-Wiseman thesis of government spending trend is more convincing
than Wagner's hypothesis. It does not claim to be an immutable economic law o1 principle
but tries to point out some pivotal characteristics of the growth pattern in the industrial
set up. Here, it must be remembered that there is natural course of advancement and
structuralchanges in the economy which in turn leads to constant and systematic expansion
the public expenditure. Similarly, urbanisation, population expansien-and awareness of
government towards duties lead to an
the civil rights coupled with an awareness of state
D movement of pubic expenditure, In this manner, this hypothesis is still description
of a particular tendency and does not isolate all the relevant causes at work.