Examples of Public Economics: Definition, Basic Concepts and Scope

Examples of Public Economics – Economics as a science that studies various human activities in order to make ends meet. In order to achieve this prosperity, humans will then carry out various economic activities such as production, consumption, and distribution.

This will later raise various kinds of economic problems, namely the imbalance of unlimited human needs with an increasingly limited number of goods or production. In this article, we will discuss public economics and some examples.

In general, public economics introduces the function of government in terms of the economy. For example, starting from taxes, government budgets, levies, to the state debt. This public economics will usually be dominated by government officials as well as economic observers, because of their direct involvement.

What is Public Economics?

Public economics or what can be called State Finance is a branch of economics that analyzes the role of the government in the economy, and also the impact of government policies in the fiscal sector on an economy. The government here has an important role in ensuring the achievement of optimal social welfare and its policies must be aimed at correcting societal behavior that prevents the economy from achieving a more efficient allocation of economic resources.

Public Economics or more precisely Public Economics is a translation from English, namely Public Economics. The term public in the Big Indonesian Dictionary means the crowd or the general public, everyone who comes (watches, visits, and so on). Meanwhile, according to the Oxford Dictionary, the explanation regarding the term public is much longer, that is, the opposite of private, relates to many people.

So the reality is that we use public absorption words and do not find the original word in Indonesian as a public equivalent. This shows that this concept is relatively new for Indonesian society. For most people, it may still not be clear enough regarding the boundaries between public or public affairs and private or private affairs. This ambiguity can lead to chaos. For example, in the management of state money, which includes public affairs, it cannot be managed privately, so there will be no acts of corruption. And vice versa, when it comes to matters of one’s personal faith and beliefs, it is a personal or private matter, so the state should not interfere so that human rights are not violated here.

With the illustration above, we can interpret public economics as a branch of economics that examines public affairs, general affairs, the affairs of many people, government affairs, community affairs, and also state affairs. One of the experts in Public Economics, namely Richard A. Musgrave (Professor Emeritus in the Department of Economics, Harvard University, USA), argues that the government has three roles in the economy, namely stabilization, allocation and distribution.

In the first role, the government must ensure that the economy is in full employment or full employment and prices are stable. That is a topic in Macroeconomics. While the second role relates to various government efforts in allocating resources in the economy. The government can carry out this role directly, for example in spending on goods for defense or education needs, or indirectly, namely through taxes and subsidies to encourage certain activities and inhibit other activities.

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Meanwhile, this third role concerns the government’s efforts to distribute products produced by the community to its members. This last role is related to equity issues and also the trade-off between equity and efficiency. Public economics is focused on examining the last two roles among the three roles of government according to Musgrave’s view.

Basic Concepts of Public Economics

In general, public economics can be interpreted as a science that studies the role of the government or the state in economic life. However, because what is studied is more directed to state finances, since the 1970s, it has been more commonly referred to as the science of state finances.

Why is it called the science of state finance? Because basically, public economics studies or examines state expenditure and revenue. As a branch of science, it means a study as well as an explanation based on certain methods and systematics. In this regard, the method used is the synthesis method as well as global analysis and special, general, as well as macro and micro analysis methods.

The theory of state finance, as stated, usually discusses public legal entities, which have been awarded public legal rights and can participate in the process of part of economics, state finance science which belongs to impure social sciences and specifically discusses related issues. finance from the government sector, among others, government revenues, government spending, government loans and debt, fiscal policy as well as other monetary.

According to Poole (1956) in Ilyas (1989), the science of state finance is closely related to the 4 main objectives of the government, namely determining the level and method of government spending, government loans, tax revenues, and also managing government debt. The purpose of this state finance science is to determine the allocation of resources and determine the effect of this placement on individual needs or the needs of society and government.

Then, according to Newman (1968) in Ilyas (1989), there are two main things which constitute the concept of state finance. The first is the scope and objectives of the government. In this case, there will be adjustments to the boundaries between the government sector and also the private sector in economic activities. Primarily in determining how the capabilities of various government activities are likely to affect levels of income and employment, the efficiency of resource allocation and economic growth and development in the private sector.

Then the second is related to discussions related to the formulation of state finance science in non-monetary terms. For example, an explanation may sound strange, where the word finance will certainly have something to do with monetary. So that in this case it will be able to analyze tax collection, transfer payments, and also other expenses to finance productive fields.

Scope of State Finance Science

Based on the understanding mentioned above, the scope of state finance can be divided into:

1. State Expenditure Theory

Through state spending, the government can try to develop the way finances in the economy are in accordance with the law of supply and demand, the ultimate goal of which is to increase economic growth and people’s welfare.

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2. State Revenue Theory

This theory discusses several sources of state revenue, discusses and also analyzes the comparison of advantages or disadvantages from various types of income and discusses the principles that apply to various choices of sources of state revenue.

3. Financial Administration Theory

This theory concerns all activities in the financial sector, including issues related to the state budget, executing the budget and also monitoring the state budget.

4. Stabilization and Growth Theory

This theory usually discusses the economic policies of a government and its relationship with fiscal policies that are directly related to state revenues and expenditures.

Recently, related to the government’s large role in ensuring the achievement of optimum public welfare and government policies that must be shown to correct people’s behavior that prevents the economy from achieving a more efficient allocation of economic resources, redistribution of people’s income and also economic stability, the science of finance the country will become so complex, not only looking at the budget side, but also the direct and indirect effects of aggregate economic activity.

Therefore, the science of state financial economics is again popularized as public economics.

Relations between Public Economics and Other Social Sciences

The following are some of the relationships between Public Economics and other social sciences, including:

1. Relations with Economics

Public Economics is a part of economics, so the principles that apply in economics will also apply in state finance, although there are certain deviations and specificities.

Microeconomic issues such as demand and supply, price theory, markets, and also achieving maximum satisfaction, will also apply to state finance. It’s the same with macroeconomic issues such as saving, investment, government spending, and also national income.

2. Relations with the Science of Law

By looking at public economics as a definition, it is clear that this knowledge is related to the term state, which includes the term private or public law. This public economics science will relate to state institutions such as the government, BPK, DPR. In addition, this knowledge is also related to Constitutional Law, when it is related to budget preparation, tax determination, tax collection, aspects of the use of government resources, and others.

3. Relations with Political Science

The division of powers, supervision, and also the use will be related to the study of political science. Determination of budget distribution or budget allocation between departments, official institutions in its embodiment, namely the application of political science. Likewise with the establishment of new taxes, government loans, PMDN and PMD are political issues within the state framework to strengthen state finances.

This is an explanation of what public economics is, the basic concepts, and its scope. For Sinaumed’s who want to learn all about other economics, you can visit sinaumedia.com to get related books. As #FriendsWithoutLimits, sinaumedia always provides the best products, so you have the best and latest information for you. To support Sinaumed’s in adding insight, sinaumedia always provides quality and original books so that Sinaumed’s has #MoreWithReading information.