公共財政的爭議問題
 

公共財政領域處在騷動中，理論和實踐水平都存在爭議。在長期存在的社會研究是否應該利用模型的基礎上，這些爭議反映理性主義和漸進的戒律及技術分析的問題。在公共財政，存在著經濟模式對抗政治模式的問題。本文通過審查公共財政的文獻，力圖嗅出這些爭議的來源，有助于這種持續的辯論。它列出了這些公共財政爭議的進化軌跡的來源。在此期間，公共財政經過了很長時期的發展，它從各種學科例如經濟學和政治學作為最有影響力的學科背景嫁接的主題。筆者提倡一種混合的辦法，需要認識到公共財政的多面性。公共財政的題材橫貫社會，經濟，政治，文化，法律和行政領域。這些問題很難從一個學科的角度解釋。憑借其進化的背景，公共財政是眾所周知的“無人區”。 
 

Contested Issues In The Sphere Of Public Finance Economics Essay

 

The public finance sphere is in ferment. There are contestations at the theoretical and praxis level. These contestations reflect long standing analytical questions about whether social studies should utilize models, precepts and techniques based on rationalism or incrementalism. In public finance, the question pits economic models against political models. This article contributes to this ongoing debate by reviewing public finance literature in a bid to sniff out the sources of these contestations. It locates the source of these contestations in the evolutionary trajectory of public finance. Public finance evolved over a long period, during which it grafted its subject matter from a wide range of disciplines with economics and political science as the most influential disciplinary backgrounds. The author advocates a hybrid approach which takes cognizant of the multi-faceted nature of public finance. The subject matter of public finance traverses social, economic, political, cultural, legal and administrative spheres. Such issues can hardly be explained from one disciplinary angle. By virtue of its evolutionary background, public finance is in the proverbial ‘no man’s land’.

 

Key Words: public finance, contested terrain, multi-disciplinary

 

Introduction

 

The sphere of public finance is a contested terrain. It is contested at the theoretical and praxis level. Contestations gravitate around issues of assumptions, concepts, models, theories, principles, precepts, methods and techniques that should inform and guide public finance studies. This long standing contest is manifest in questions of this nature: Should the management of public finance be based on principles and models drawn from liberalism or interventionism; rationalism or incrementalism? Should national budgets prioritize contractionary over expansionary fiscal measures? Should economic analytical frameworks take precedence over political science models in explaining the trajectory of public finance management? Should efficiency considerations take precedence over social considerations in public finance processes? Should the role of the market be prioritized over the role of the state? In this article, the author basically argues that the source of these contestations lie embedded in the evolution of public finance evolved over the years.#p#分頁標題#e#

 

Evolution

 

Public finance evolved over a long period, incorporating concepts, theories and principles from far flung disciplinary backgrounds, a process that left a multi disciplinary imprint in public finance. In fact, its evolution can be traced as far back as the biblical times. Biblical literature refers to a Roman Empire that had elaborate tax collection systems. There is even reference to the tax collector Zechaeus whose shrewdness as a tax collector is largely consistent with modern day tax collection practices. In fact, it should be noted that the idea of national treasury (national purse) evolved from the personal treasury of the emperors of Rome.

 

The evolution of public finance can also be traced to Adam Smith’s 18th classical work-The Wealth of Nations in which issues relating to sovereign duties, revenues of the sovereign, expenses of the sovereign, principles of taxation as well as appropriate ways of defraying expenditures are covered at length (Prest, 1977; Pigou, 1947). Adam Smith provides the basis of the state and why state funding is critical in the provision of some goods and services. States have sovereign obligations to provide basic goods and services to all citizens, irrespective of whether they are rate payers or not. Governments are also obliged to collect funds to ensure that these core services are provided in line with national expectations. This forms the basis of compulsory taxation by states. It also explains the political context of public finance.

 

The evolution of public finance can also be traced to 19th century writings by J.S. Mill and Ricardo’s Principles of Political Economy and Principles of Political Economy and Taxation, respectively (. A recurring issue in this literature is that public finance traverses the political and economic spheres and that such a study is best understood from political economy approaches. This thinking is manifest in the choice of thematic issues, namely, the politics of government finance, principles of taxation, classification of taxes into direct and indirect as well as problems and effects of taxation. This emphasis on principles reflects growing awareness of the need to be sensitive to diverse values of equity, economy (efficiency) and administrative convenience. Tax collection should strike a balance between increasing revenue (adequacy concerns) and maintaining acceptable social welfare levels. It also reflects growing awareness of the need to appreciate the broader socioeconomic and political facets of public finance.

 

By the 20th century, conceptions of the subject matter of public finance had solidified to such an extent that books under the titles ‘public finance’ had been published. There was also an emerging emphasis on the need for effective coordination and adjustments in the fiscus (see Dalton, 1922; Musgrave, 1969; Buchanan, 1978; Hardin, 1968). The influence of Keynesian theories was also evident, governments being advised to apply a mix of expansionary and contractionary fiscal policies, depending with the state of the economy (Eshaq, 1984, Seidman, 1986).#p#分頁標題#e#

 

Review of most 21st century literature point to a visible expansion in the subject matter of public finance, with distinct emphasis on fiscal management, fiscal prudence and discipline (Shaw, 2005; Kioko, 2011, IMF, 2003; Afrodad, 2011), good governance, transparency and accountability (Wheeler, 2004), fiscal decentralization (IMF, 2012), fiscal reforms (IMF, 2011) and the administrative and intergovernmental frameworks of public finance (Mikesell, 2011).

 

Within these evolving conceptual and analytical frameworks, public finance performance is primarily viewed as a function of institutional contexts. It has to be understood within the intergovernmental contexts of institutions such as parliaments, audit offices, finance ministries, treasury, revenue authorities and central banks. Institutions play key roles in the public finance sphere through functions ranging from fiscal policy planning, controlling, coordinating, auditing, monitoring to evaluation.

 

Contestations at the Conceptual Level

 

This evolutionary background induced strains in the conception of public finance. Definitions generally reflect disciplinary leanings. For instance, in definitions by Bachnan (1960) and Bailey (1995), one reads attempts to define and approach public finance from an economic perspective, the former defining it as “economic activities of government” (p: 3) and the later presenting it as the “economics of the public sector” (p: 17). Within these definitional frameworks, public finance is located within the disciplinary sphere of economics. There are explicit emphases on issues of efficiency in resource allocation and use, effects of government spending on the economy, among others. The positivist economic thinking recurs throughout these writings.

 

In definitions by Auld and Muller (1983) and Musgrave and Musgrave (1984), one reads attempts to relate public finance to public administration and public policy. Musgrave and Musgrave define public finance as “use of government expenditures and resources to pursue policy objectives” (p: 7) while Auld and Muller describe it as “operating the revenue and expenditure measures of the public budget” (p: 6). Public finance is presented as a means to achieve broad concerns of public administration and management. Public finance enables the implementation of public policies and national programmes. The authors locate public finance within the disciplinary sub-field of public administration. This approach is also evident in definitions by Tailor (1984) and Aronson (1983). They define public finance as the “finances of the public as an organized group under the institution of government” (p: 3) and “financial activities of governments and public authorities” (p: 5), respectively. There is visible emphasis on the governmental contexts of public finance. Public finance is about government finances. This orientation is most evident in works by Visser and Erasmus (2010), Mikesell (2011); IMF (2011) where there is explicit emphasis on public institutions, systems, procedures and mechanisms by which government receives revenue, expends money and exercises control through the budget. These approaches emphasize the need to appreciate the legal, institutional and policy contexts of public finance, procedures and intergovernmental structures regulating public finance.#p#分頁標題#e#

 

Paradigmatic Contestations

 

The long standing public finance debate is also evident at the paradigmatic level where there it pits interventionism and liberalism. Within each paradigm one reads a distinct model of the role of the state in the economy and the preferred approach to public finance management. Interventionism advocates expansionary fiscal management strategies that are mostly characterized by huge public spending and borrowing, provision of subsidies and welfare grants to perceived distressed sectors of the economy. Interventionism is based on the assumption that proactive state participation in the economy is critical to socioeconomic development. It has a big state, welfare thrust. Interventionist economic and fiscal management approaches were visibly dominant in the 1960s, 1970s and the 1980s. Liberalism, on the other hand, is rooted in the belief of the supremacy of the market. Its basic assumption is that the market discipline should be accorded more space that the state in economic management. It advocates minimal or lean governmental frameworks, deregulated economy and greater competition in the market. Liberalism advocates reductions in state expenditures through cuts in the civil service, social spending, subsidies, and grants. The notion of fiscal austerity echoes through liberalism. Public sector reforms (in the form of civil service reforms, public enterprise reforms, fiscal reforms) that were adopted in the post 1990s were initiated under liberalism. Experiences with these two dominant paradigms strongly suggest that neither constitutes the panacea to the economic and public finance problems in Africa and the developing world at large (Mlambo, 1997; IMF 2011). The answer lies in hybrid fiscal policy interventions that draw from both. These scenarios are also evident in the theoretical sphere of public finance

 

Issues at the theoretical level

 

Although diverse theoretical strands have emerged over decades to explain public finance-related issues, these theories can basically be categorized into ‘pro’ and ‘anti’ state intervention theories. This theoretical divide basically reflects the long standing argument between liberalism and interventionism. Seidman (1986) discusses this within the context of the mainstream and political economy paradigmatic divide. Key unresolved theoretical questions include: What theoretical models should inform public finance practice and management? Should fiscal planners give primacy to redistributive fiscal policies (distributive justice) or economic growth (assuming the trickle down effects)? Should governments allow an expanded or restricted role of the market? Should governments adopt expansionary or restrictive fiscal policies? Does state intervention always result in allocative efficiency, distributive equity and economic stability (Bailey, 1995)?#p#分頁標題#e#

 

Pro-State Theories

 

These are largely right-wing theories, tied together by the assumption of a neutral and protective state whose intervention in national economic activities is primarily motivated by public good motive. The state, for instance, may intervene by setting up national pension schemes or AIDs levy. The role of the state is viewed as that of an arbitrator among competing interests. These sentiments are also evident in emerging theories such as the “despotic benevolent models’ where governments are portrayed as “always acting in the public interest, seeking the best allocation of resources so as to maximize welfare by offsetting specific instances of market failure” (Bailey, 1995: 97). Governments are presumed to know better what is best for their citizens and are therefore in better steady to make fiscal decisions on behalf of their citizens to promote their welfare.

 

Public sector financing derives theoretical support in the ‘theory of public goods’. The theory justifies state funding on the basis of the “public good problem” (Musgrave and Musgrave, 1984: 45). The public good problem is animated by the nature of public goods. Public goods are characterized by of joint consumption (nonrivalry) and exclusion. In joint consumption situations, the benefits derived from a given service are enjoyed by more than one at the same time. In other words, consumption is non-excludable. The benefits of that good can be enjoyed by people whether they have paid for it or not. Since consumption is non rival, the use of the service does not preclude others from concurrent full use of the service. The fact that those who refuse to pay can still access the same services at zero cost generates may generate free riding behavioral problems, which Hardin (1968, 1243; Hardin, 1998, 682) defines as the “tragedy of the commons”. Tragedies of this nature manifest themselves in the form of free riding when members of the public are fully aware that they can still access the service even if they choose to hide their preferences, pretending that the service is of no value to them. Public sector settings are most prone to free riding and self-interest tendencies because the users of public sector goods and services are not necessarily those who would have paid taxes. Collectively, these characteristics animate the public good problem. Exclusion exists where consumption of a service by one person concurrently excludes others from consuming that service. This typifies private goods.

 

Public finance is also justified on the basis of ‘market failures’ arising from the imperfections in the market. While efficiency in market operations is based on assumptions of the existence of willing buyers and sellers expressing their preferences in a perfect market (characterized by knowledgeable consumers, existence of free entry and exit options, consumer sovereignty and competitive market), such hypothetical conditions rarely obtain in real market settings. Left to operate on their own, private markets would not produce all the needed goods and services at levels that resonate with societal needs. Some goods that are basic to society but less profitable may not be produced, scenarios that are likely to lead to an erosion of public economic welfare. In practice, members of the public left on their own tend to make inefficient provision of personal insurance for ill-health, injury, old age, death, among others. To this end, governments intervene through political processes of compulsory national pension schemes, subsidies, grants, tax incentives and provision of services.#p#分頁標題#e#

 

The case for public funding is also found in ‘externality arguments’. Externalities are positive or negative spillover, third-party effects or by-products of an activity (Quade, 1984) A negative externality arises when an economic activity results in social costs, for instance, environmental pollution, air pollution, discharge of affluence and toxic materials in rivers, supply of GMOs into the market, among others. They are termed externalities because the costs or benefits which should be incurred or enjoyed by the producer are externalized to members of the public. Under these circumstances, it is argued, governments intervene by enacting punitive regulatory instruments and tax measures to force those involved in such activities to be accountable. For instance, governments may increase tax on tobacco and alcohol in order to reduce their consumption.

 

Anti-State Theories

 

These are left wing, political economy theories which question the claim of a public-spirited government which intervenes in the economy for the common good (Seidman, 1986). For instance, class analytic theorists comprising Marxists, dependency and neo-Marxists question the notion of governments as always intervening in the interest of the public. They locate the source of fiscal policy change in relationships of power and domination among social classes. The state, in their view, is an instrument of domination that reflects the structure of class relationships in society. The primary function of the state is to ensure the legal, institutional and ideological hegemony of the dominant class. Argued thus, the purpose of fiscal policy is to advance the interests of dominant groups. The nature of the state and political dynamics within a given state has a significant bearing on fiscal decision making and budgetary allocations. Fiscal policy interventions in the form of budgets, taxes and borrowings are not always in the public interest. Marxist theorists even see the expansion of social welfare fiscal policies in capitalist countries as “representing demagogic ploy to legitimate capitalism and prevent more fundamental change” (Seidman, 1986).

 

These sentiments are also echoed in ‘state interest models’ (Tangri, 1999; Miliband, 1969) in which governments are viewed as analytically separable from society and pursuing own interests which include the achievement and maintenance of their own hegemony, the maintenance of social peace, and achievement of national development as defined by policy elites representing particular regimes. These embedded state interests may or may not correspond to the interests of particular classes or groups in society. At other times, in pursuit of its own interests, the state may adopt policies that that are not beneficial but detrimental to the interests of powerful societal groups (Miliband,1969). The underlying argument is that the state is considerably more than an arena for societal conflict or an instrument of domination as implied in class analytic models, but a powerful actor in its own right. (Rothchild & Chazan, 1988, 123) refer to the “embedded orientations of the state that are “institutionalized in the ministries and agencies of the state”#p#分頁標題#e#

 

Treading this line of thinking are ‘public choice theories’ which view governments as basically composed of self-seekers, traits which as they argue, incline fiscal policy decisions and interventions to distort economic activities to a greater extent than unregulated markets (Bailey,1995). These views are also echoed in ‘leviathan’ models of government which emerged in the 1980s and generally reflect growing disenchantment with governments across the world. Governments, as claimed in these models, grow in size and extend their fiscal tentacles in the economy because there are weak societal controls on their operations. The public is weak because of the disjuncture between those who vote, pay for services and those who use public sector services (Ibid, 24). Due to these ineffectual controls, governments (which are made up of self-serving politicians and bureaucrats) end up growing like monsters (leviathans), manipulating and distorting public choice to further their interests.

 

Notwithstanding their limitations, these arguments throw powerful insights into fiscal decision making and actions. Students of public finance should be attentive to the challenges of politics, self motive and captured fiscal systems. These subterranean forces may interfere with transparency and accountability in revenue collection, budget formulation and expenditure allocation, borrowing, expenditure control, among others. Underscored in these theoretical arguments in the need to institute and inculcate a culture of best practices in national fiscal management systems. Such practices not only ensure that governments remain responsive and accountable to their citizens but also enable them to effectively track revenue inflows and outflows, promote fiscal prudence, integrity, accountability and transparency in the planning and utilization of funds. Overall, it builds political credibility, acceptance and legitimacy of national fiscal systems. In fact, whatever the prevailing system and ideology of Government, be it capitalist, socialist, or mixed economy-sound fiscal management remains the main vehicle through which public welfare is enhanced

 

Issues at the Budget Level

 

Contestations are also evident at the national budget level. These contestations revolve around the notion and expected role of national budgets in the economy. These expectations are shaped by disciplinary and professional leanings. For instance, economists basically conceptualize national budgets in efficiency terms. They see the budget as a blueprint for promoting economic growth. The budget should efficiently allocate scarce resources of governments. It should provide requisite incentives for promoting economic growth in all sectors of the economy. It is a framework for stimulating growth. Budget performance is thus assessed on the basis of its potential to enhance growth rate, reduce budget deficits, create employment, and stabilize the economy, among others.#p#分頁標題#e#

 

For political scientists (including political economists), national budgets should play a balancing role in socioeconomic development. They should balance the diverse and usually diverging interests and values of society (Wildavsky &Caiden, 1999; Rubin, 1997). National budgets are political processes, embodying political choices of the political leadership. They are informed by considerations of interest accommodation and conflict management. As argued by Laswell (1973), national budgets provide a professional framework for dealing with the ‘who gets what, how and when’ questions of society. There are issues of “political judgment, political calculation and political choice” (Mullard (1993) cited in UNDP/Poverty Reduction Forum (1999, 2).Implied in these arguments is that national budgets are inherently political processes. Analysis should be cognizant of this fundamental political dimension.

 

Conclusions and Recommendations

 

The term public finance term essentially captures the financial activities of governments as ministries, departments, state enterprises and local authorities. Financial activities cover the revenue and expenditure activities of government as reflected in national budgets.

 

The prefix ‘public’ designates the governmental and political context of public finance. It locates the state as the source of public finance. Public Finance activities are exercised within and by defined governmental structures as directed by the political leadership. Public finance is about allocating and utilizing state financial resources to achieve set national ideals. It is inherently political.

 

The source of ferment in the sphere of public finance can be traced to its nature and evolutionary trajectory. This evolutionary trajectory left a multi-disciplinary imprint in public finance. It strides far flung disciplines such as economics, political science, management, law, and sociology.

 

It is instructive to note that the long standing disciplinary contest in the sphere of public finance is between political science/public administration and economics. This disciplinary tug war is manifest at the level of theory and praxis. It is evident at the level of conception, theorizing and fiscal enforcement. It is manifest in paradigmatic questions about whether to adopt interventionism or liberalism as guiding frameworks in the management of public finance. Each paradigm has its own supportive models/theories, assumptions, principles and intervention instruments. For instance, where liberalism is the operative ideology, market-initiated fiscal interventions characterized by cuts in aggregate spending across ministries, withdrawal of subsidies and grants, selling of state companies, and cuts in the civil service establishment.#p#分頁標題#e#

 

Public Finance studies call for hybrid approaches that are sensitive to the political economy of public finance. Public Finance deals with public problems. These public problems are multi-faceted. Each specific problem has a political, economic, social, legal, cultural, and management face. Such problems are not amenable to single disciplinary explanations and solutions. Public Finance is lies in the proverbial ‘no man’s land’.

 

Public finance studies must acknowledge the inherent governmental / public administrative. It must be analyzed within its institutional contexts. Public finance studies should acknowledge that while efficiency in financial resource allocation and use is indeed the cherished ideal of every government, the efficiency model applied should go beyond traditional monetary concerns to include the social costs.