Abstract
Most people would agree that, used sparingly and judiciously, public finance yields many social and economic benefits. It has the potential to improve considerably the population’s standard of living, both by fostering national prosperity and sharing it out in a more efficacious manner. However, it cannot be assumed that raising and spending public finance is always solely beneficial. At the very least, private spending has to be given up in order to finance public spending (for example via payment of taxes). In other words, there is a direct opportunity cost associated with public expenditure, namely the private spending that could otherwise have taken place were it not for payment of taxes. If, however, public finance fosters national prosperity (for example through investment in physical and human capital), then this essentially short-term opportunity cost will eventually be offset by greater private sector income (including profits) and wealth in the future.
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Further Reading
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© 2004 Stephen J. Bailey
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Bailey, S.J. (2004). Beneficial and Adverse Effects of Public Finance. In: Strategic Public Finance. Palgrave, London. https://doi.org/10.1007/978-1-4039-4394-1_6
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DOI: https://doi.org/10.1007/978-1-4039-4394-1_6
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