CHAPTER 1: ROLE AND SCOPE OF PUBLIC

FINANCE

Economics: deals with the utilization of scarce

resources
Public Finance:
-

a field of economics that have alternative

uses to satisfy human wants
Deals with the revenue and expenditure
patterns of the government and their effects
on the economy
Governments Finances

Basic goal: Satisfaction of human wants

DIFFERENCE BETWEEN PUBLIC & PRIVATE

Private wants: only an individual can satisfy the
need. Can be satisfied through the mechanism of
the market. Enjoyment can be made subject to
price payment.
Exclusion Principle: Money is insufficient to
satisfy needs and wants. A person is excluded from
satisfaction of commodity if he is not willing to pay
for it
Public wants: government will be the one to satisfy
the need. Cannot be satisfied through the working
of the market. Enjoyment is independent in his
payment
Classification of Public wants:
Social wants: satisfaction is subject
to the principle of consumer
sovereignty
o Provided by the government
but an individual has freedom
to avail or not
o Government provides PNP
for security but an individual
can still hire security guards
from private agencies
Merit wants: subject to the
exclusion principle and satisfied by
market within the limits of effective
demand

FINANCIAL MEANS AVAILABLE

Private Finance: Securities, Shares of
Stock, borrowing etc.
Public Finance: Taxation, Printing money,
borrowing or through sale of assets
BUDGETING PROCEDURE
Private Finance: starts from income side
then proceeds to individual expenditure item
Public Finance: determine first its
expenditure needs and the looks for
possible ways of financing them
PUBLIC FINANCE PRINCIPLES:
Keep expenditures at the lowest level as
possible (Efficiency)
Balance the budget annually
Taxes should be levied and collected in
such a way as to interfere at least within
allocation of resources and the distribution
of income
GOALS OF FREE ENTERPRISE SYSTEM

Strengthen economic freedom

Promote overall economic efficiency
Promote economic growth
Promote economic stability
Promote economic security

PUBLIC FINANCE FUNCTION:

1. Allocation Section: determine what goods
and services are to be produced, who is
going to pay and by how much for such
goods and services
2. Distribution Section: determination and
attainment of a proper state of income
distribution
3. Stabilization Section: maintaining a high
level of resource utilization that is full
employment of all factors of production

CHAPTER 2 DEVELOPMENT OF PUBLIC

FINANCE

ANCIENT PUBLIC FINANCE

The Slave Societies
State: comprised of the government, the
people, territory, and sovereignty
Public Finance: financed the activity of the
government
Trade and Commerce: potentially rich
sources of revenues were not yet
developed.
Asset Principle: direct taxation has to have
consent of the people

Budgeting: apportion revenues to perform

several functions
Borrowings: solicited gifts or levied limited
taxes
Ancient State Audit: concerned with
maintenance and inspection of financial
records
Ombudsman: executive-judicial
bureaucracies
Medieval Public Finance
Medieval public finance: followed the
changes in the political structure of the state
during middle ages
Medieval conditions: