Improving Allocative Efficiency

Abstract

The traditional view of public finance attributes three major goals to the management of public finance: stabilization, reallocation, and redistribution.2 It is the inter-relationships between these that give rise to the major issues in public finance. For instance, provision of public educational services through the levying of taxation affects real income distribution, while distributional activities inevitably affect relative prices and consumer demands, and therefore the allocation of resources to the production of various goods. Of these interrelationships, there is perhaps no more crucial question for public finance than the following: How can society collectively determine the optimal amount of public goods, and how shall the costs of these goods be apportioned among individuals (Due and Friedlaender, 1973, p. 48)? The scope of this chapter is, first, to acknowledge the contribution that the answering of this question can have for the goal of stabilization through management of the aggregate fiscal position, but mainly to examine the specific mechanisms that can assist improving allocative efficiency through public budgeting.KeywordsAgency CostPublic BudgetProgram ReviewPerformance BudgetBudget SystemThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.