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43 Cards in this Set
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Public Finance |
Science older than Political Economy |
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Adam Smith |
Who dedicated an entire book to finance |
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Taxation |
Part of public finance that received attention because it dealt with an activity that was admittedly necessary |
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Expenditure |
field of public finance that was neglected |
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1892 |
year wherein the field of Public Finance was systematically treated |
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Charles F. Bastable's Public Finance |
systematize the field of Public Finance |
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Public Finance |
deals with the way the State acquires and expends its means of subsistence |
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Public Finance |
the science which deals with the activity of the statesman in obtaining and applying the material means necessary for fulfilling the proper functions of the State |
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1. ...deals with a definite and limited field of human knowledge. 2. ...admits of an orderly arrangement of facts and principles, and contains many laws of general progress belonging exclusively to its own field 3. ... admits of the application of scientific methods of investigation 4. ... foresees as well as explains a certain class of phenomena 5. ... generally, if not universally, so regarded |
Public Finance is a Science because it... |
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Political Economy; Political Science |
other sciences closely related to Public Finance |
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Public Finance |
corporate part of Political Economy |
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consume wealth produce wealth interfere with the distribution of wealth |
nature of activities under Public Finance |
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Public Finance |
the study of the financial activities of governments and public authorities - describes and analyses the expenditures of governments and the techniques governments used to finance its expenditures |
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institution and decision making process |
what Public Finance is interested in studying |
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Public Finance |
deals with the economic role of the government as a response to market failures, its limitations in responding to such failures, the design and evaluation of expenditure and tax program, and short and long -term consequences of the deficit in the economy |
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Birth Public schools Housing Food/Medical subsidies PhilHealth/ SSS Tax Government employees Government impact on employment condition Impact on prices of goods Public Infrastructures Legal structures |
Public Finance influence on daily lives |
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Mixed economy |
some activities are undertaken by private firms, others by the government |
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Government |
It alters the behavior of private sector through regulation, taxes, subsidies |
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Defining the appropriate boundaries between government and private activities |
Problem faced by mixed economies that is the cause of Public Finance being important and interesting |
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Why does the government do some things and not others? Why has the scope of government activities changed over the past hundred years? Why does it do more in some countries than it does to other countries? Does the government do much? Does it attempt to do well? Could it do better? |
Questions with which Public Finance is concerned |
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Making us aware of the strengths and limitations of both public and private sectors |
What Public Finance contributed to the understanding of issues |
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Great Depression |
economists and politicians became aware of a large number of ways in which the free-market economy seemed to fail to meet certain basic social needs -unemployment (25%) - National Output decline by 30% |
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Individuals virtually lost all their money elderly people did not have the resources on which to survive |
Impact of Great Depression |
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-Stabilized the level of economic activity -Passed legislations aimed at alleviating certain problems -US: referred to as New Deal |
Government Role |
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Unemployment insurance Social security Insurance to depositors Programs aimed at supporting agricultural prices Other programs aimed at a variety of social and economic objectives |
Specific problems which was aimed to be alleviated through passing legislations |
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Poverty Inadequate education Prospects for obtaining good jobs were bleak |
Conditions experienced by some individuals after WW2 |
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Inequities |
provided impetus for many of the government programs that were enacted |
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War on Poverty |
launched by Pres. L. Johnson |
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insurance programs to provide food medical care for the poor -job retaining programs |
"safety net" |
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differences in access to medical care between the rich and the poor |
successfully eliminated through providing medical assistance |
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difference in life expectancy between the rich and the poor |
wasn't eliminated by medical assistance |
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Thegovernment shouldnot abandon itsefforts to solve major social and economic problems facing the nation, but, that the greatercare must be taken inthe appropriate design of government programs. |
Lesson learned |
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market failures |
led to major government programs |
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shortcomings of the government programs |
led economists and political scientists to investigate government failure |
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Underwhat conditions would government programs not work well? Werethe failures of government programs mere accident or were they predictableresults, following from inherent nature of governmental activity? Arethere lessons to be learned for the design of programs in the future? |
Questions on Government Failure |
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1. Limited information 2. Limited control over private market responses 3. Limited control over bureaucracy 4. Limitations imposed by political processes |
4 reasons for the systematic failures of the government to achieve its objectives |
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Limited information |
the consequences of many actions are complicated and difficult to foresee |
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Limited control over private market responses |
government has only limited control on the consequences of its actions |
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Limited control over the bureaucracy |
how the detailed regulations are implemented is critical in determining the effects of legislations |
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Limitations imposed by political processes |
choosingamong those actions through political process would raise additionaldifficulties |
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elected representatives |
people who decide upon government actions have the incentives to act for the benefit of special interest groups |
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failure of politicians to carry out public interest |
consequenceof the greed or malevolence of a few wayward politicians, -the inevitableconsequence of the workings of political institutions indemocratic societies |
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Recognitionof the four limitations on government action |
a prerequisitefor the design of successful government policies. |
