CHAPTER 3

PUBLIC
EXPENDITURE
POLICY 1
What is Public Expenditure ?
 Public Expenditure refers to Government expenditure i.e. Government
spending. It is incurred by Central, State and Local governments of a
country.
 Public expenditure can be defined as, "The expenditure incurred by
public authorities like central, state and local governments to satisfy
the collective social wants of the people is known as public
expenditure."
Throughout the 19th Century, most governments followed laissez faire
economic policies & their functions were only restricted to defending
aggression & maintaining law & order. The size of pubic expenditure was
very small.

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 But now the expenditure of governments all over has significantly increased. In
the early 20th Century, John Maynard Keynes advocated the role of public
expenditure in determination of level of income and its distribution.
 In developing countries, public expenditure policy not only accelerates economic
growth & promotes employment opportunities but also plays a useful role in
reducing poverty and inequalities in income distribution.

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 Classification of Public Expenditure
Classification of Public expenditure refers to the systematic arrangement of
different items on which the government incurs expenditure.
 Different economists have looked at public expenditure from different
point of view. The following classification is a based on these different
views.

1. Functional Classification

Some economists classify public expenditure on the basis of functions for

which they are incurred. The government performs various functions like
defense, social welfare, agriculture, infrastructure and industrial
development. The expenditure incurred on such functions fall under this
classification. These functions are further divided into subsidiary functions.
This kind of classification provides a clear idea about how the public funds
are spent.

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2. Revenue and Capital Expenditure

Revenue expenditure are current or consumption expenditures incurred on civil

administration, defence forces, public health and education, maintenance of
government machinery. This type of expenditure is of recurring type which is
incurred year after year.
 On the other hand, capital expenditures are incurred on building durable assets,
like highways, multipurpose dams, irrigation projects, buying machinery and
equipment. They are non recurring type of expenditures in the form of capital
investments. Such expenditures are expected to improve the productive capacity
of the economy.

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3. Transfer and Non-Transfer Expenditure
A.C. Pigou, the British economist has classified public expenditure
as :
Transfer expenditure and Non-transfer expenditure
Transfer Expenditure :-
Transfer expenditure relates to the expenditure against which there is no
corresponding return. Such expenditure includes public expenditure
on :-
 National Old Age Pension Schemes,
 Subsidies,
 Unemployment allowances,
 Welfare benefits to weaker sections, etc.
By incurring such expenditure, the government does not get anything in return, but it
adds to the welfare of the people, especially belong to the weaker sections of the
society. Such expenditure basically results in redistribution of money incomes within
the society.

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Non-Transfer Expenditure :-
 The non-transfer expenditure relates to expenditure which results in creation of
income or output.
 The non-transfer expenditure includes development as well as non-development
expenditure that results in creation of output directly or indirectly.
 Economic infrastructure such as power, transport, irrigation, etc.
 Social infrastructure such as education, health and family welfare.
 Internal law and order and defence.
 Public administration, etc.

By incurring such expenditure, the government creates a healthy conditions or

environment for economic activities. Due to economic growth, the government may
be able to generate income in form of duties and taxes.

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4.1 Productive and Unproductive Expenditure
This classification was made by Classical economists on the basis of creation of
productive capacity.
 Productive Expenditure :-

Expenditure on infrastructure development, public enterprises or development of

agriculture increase productive capacity in the economy and bring income to the
government. Thus they are classified as productive expenditure.
 Unproductive Expenditure :-

Expenditures in the nature of consumption such as defence, interest payments,

expenditure on law and order, public administration, do not create any productive
asset which can bring income or returns to the government. Such expenses are
classified as unproductive expenditures.

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4.2 Development and Non-Development Expenditure
Modern economists have modified this classification into distinction between
development and non-development expenditures.
 Development Expenditure :-

All expenditures that promote economic growth and development are termed as
development expenditure. These are the same as productive expenditure.
 Non-Development Expenditure :-

Unproductive expenditures are termed as non development expenditures.

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5. Grants and Purchase Price

This classification has been suggested by economist Hugh Dalton.

Grants :-
 Grants are those payments made by a public authority for which their may not be
any quid-pro-quo, i.e., there will be no receipt of goods or services. For example,
old age pension, unemployment benefits, subsidies, social insurance, etc. Grants
are transfer expenditures.
Purchase prices :-
 Purchase prices are expenditures for which the government receives goods and
services in return. For example, salaries and wages to government employees and
purchase of consumption and capital goods.

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6. Classification According to Benefits

Public expenditure can be classified on the basis of benefits they confer on

different groups of people.
 Common benefits to all : Expenditures that confer common benefits on all the
people. For example, expenditure on education, public health, transport, defence,
law and order, general administration.
 Special benefits to all : Expenditures that confer special benefits on all. For
example, administration of justice, social security measures, community welfare.
 Special benefits to some : Expenditures that confer direct special benefits on
certain people and also add to general welfare. For example, old age pension,
subsidies to weaker section, unemployment benefits.

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7. Hugh Dalton's Classification of Public Expenditure
Hugh Dalton has classified public expenditure as follows :-
 Expenditures on political executives : i.e. maintenance of ceremonial heads of
state, like the president.
 Administrative expenditure : to maintain the general administration of the
country, like government departments and offices.
 Security expenditure : to maintain armed forces and the police forces.
 Expenditure on administration of justice : include maintenance of courts,
judges, public prosecutors.
 Developmental expenditures : to promote growth and development of the
economy, like expenditure on infrastructure, irrigation, etc.
 Social expenditures : on public health, community welfare, social security, etc.
 Pubic debt charges : include payment of interest and repayment of principle
amount.

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Causes of Increase in Public Expenditure:
Size of the Country and Population:
 We see an expansion of geographical area of almost all countries. Even in no-
man’s land one finds the activities of the modern government.
 Assuming a fixed size of a country, developing world has seen an enormous
increase in population growth. Consequently, the expansion in administrative
activities of the government (like defence, police, and judiciary) has resulted in a
growth of public expenditures in these areas.

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Defence Expenditure:
 The tremendous growth of public expenditure can be attributed to threats of war.
No great war has been conducted in the second half of the twentieth century. But
the threats of war have not vanished; rather it looms large. Thus, mere sovereignty,
demands a larger allocation of financial sources for defence preparedness.
Welfare State:
 The 19th century state was a ‘police state’ while, in 20th and 21st centuries
modern state is a ‘welfare state’. Even in a capitalist framework, socialistic
principles are not altogether discarded. Since socialistic principles are respected
here, modern governments have come out openly for socio-economic uplift of the
masses.

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 Various socio-economic programes are undertaken to promote people’s welfare.
Modern governments spend huge money for the purpose of economic
development. It plays an active role in the production of goods and services. Such
investment is financed by the government.
 Besides development activities, welfare activities have grown tremendously. It
spends money for providing various social security benefits. Social sectors like
health, education, etc., receive a special treatment under the government
patronage. It builds up not only social infrastructure but also economic
infrastructure in the form of transport, electricity, etc.

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Economic Development:
 Modern government has a great role to play in shaping an economy. Private
capitalists are utterly incapable of financing economic development of a country.
This incapacity of the private sector has prompted modern governments to invest
in various sectors so that economic development occurs.
 Economic development is largely conditioned by the availability of economic
infrastructure. Only by building up economic infrastructure, road, transport,
electricity, etc., the structure of an economy can be made to improve. Obviously,
for financing these activities, government spends money.

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Price Rise:
 Increase in government expenditure is often ascribed to inflationary price rise.

Debt Servicing

The government has been borrowing heavily both from the domestic market and
from foreign sources, to meet its expenditure. As a result of which, the
government has to make huge amounts of money towards interest payments.

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Urbanization

There has been an increase in urbanization. The increase in urbanization requires

heavy expenditure on law and order, education, civil amenities like drinking water
housing, electricity, etc.

Industrialization

Setting up key and basic industries requires a huge capital and profit may arise
only in the long run. It is the government which starts such industries in a planned
economy. The public sector has created a strong infrastructure as a support base
for our industrial sector by investing huge capital. The government has not only
improved the rail, air and sea transport but has also expanded them manifold.

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Education

Education not only contributes to mental development of man but also raises
productivity. Moreover mass education is necessary condition for the success of
democracy. The state has made attempts to create various types of educational
facilities. In order to meet growing demand for skilled labors, Government has
also set up specialized institutes for medical & technical education which involves
heavy expenditure.

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Principles Governing Public Expenditure or Canons of Public Expenditure
 Rules or principles that govern the expenditure policy of the government are called
canons of public expenditure. Fundamental principles of public spending
determine the efficiency and propriety of the expenditure itself. While making its
spending program, government must follow these principles. These principles, in
short, are called canons of public expenditure.
 Findlay Shirras has laid down the following four canons of public
expenditure:
(i) Canon of benefit
(ii) Canon of economy
(iii) Canon of sanction
(iv) Canon of surplus

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(i) Canon of Benefit:
 According to this canon, public spending has to be made in such a way that it
confers greatest social benefits. In other words, public expenditure must not be
geared in such a way that it provides benefits to a particular group of the
community. Thus, public expenditure is to be made in those directions where
general benefits rather than specific benefits flow in.
 However, often public expenditure is incurred for the benefit of a particular group
(say, slum dweller, tribals). This sort of public expenditure does not violate canon
of benefit. Any public expenditure for the development of a backward area
does promote social interest.

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(ii) Canon of Economy:
 Economy does not mean miserliness. It refers to the avoidance of wasteful and
extravagant expenditure. Public expenditure must be made in such a way that it
becomes productive and efficient. Efficiency in public expenditure requires
economy of expenditures. To enjoy the maximum aggregate benefit from any
public spending program, it is necessary that the canon of economy is
observed.
 An uneconomic expansion in public expenditure will result in scarcity of funds,
the much-needed growth of the productive sectors will be hampered. This means
lower social benefit. It is thus obvious that the canon of economy is not
independent of the canon of benefit.

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(iii) Canon of Sanction:
 The canon of section, as suggested by Shirras, requires that public spending
should not be made without any concurrence or sanction of an appropriate
authority. Arbitrariness in public spending can be avoided only if spending is
approved. Further, economy in public spending can never be ensured if it is not
sanctioned.

(iv) Canon of Surplus:

 This canon suggests the avoidance of deficit in public spending. Like individuals,
saving is a virtue for the government. So the government must prepare its
budget in such a way that government revenue exceeds government
expenditure so as to create a surplus. It must not run deficit to cover its
expenditure.
 However, modern economists do not like to attach any importance to Shirras’
fourth canon— the canon of surplus. To them, deficit financing is the most
effective means of financing economic programs of the government.

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 Importance of Public Expenditure:

 An old-fashioned dictum says that “The very best of all plans of finance is to
spend little, and the best of all taxes is that which is least in amount.” No one
today believes this philosophy. In the 1930s, J. M. Keynes emphasized the
importance of public expenditure.

 The modern state is described as the ‘welfare state’. As a result, the activities of
the modern government have widened enormously. Modern governments are
undertaking various social and economic activities, particularly in less
developed countries (LDCs).

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Economic Development:
 Without government support and backing, a poor country cannot make huge
investments to bring about a favorable change in the economic base of a
country. That is why massive investments are made by the government in the
development of basic and key industries, agriculture, consumable goods, etc.
 Public expenditure has the expansionary effect on the growth of national
income, employment opportunities, etc. Economic development also requires
development of economic infrastructures. A developing country like Bangladesh
must undertake various projects, like road-bridge-dam construction, power plants,
transport and communications, etc. These social overhead capital or economic
infrastructures are of crucial importance for accelerating the pace of economic
development.

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Fiscal Policy Instrument:
 Public expenditure is considered as an important tool of fiscal policy. Public
expenditure creates and increases the scope of employment opportunities
during depression. Thus, public expenditure can prevent periodic cyclical
fluctuations. During depression, it is recommended that there should be more and
more governmental expenditures on the ground that it creates jobs and incomes.
 On the contrary, a cut-back in government’s expenditure is necessary when the
economy faces the problem of inflation. That is why it is said that by
manipulating public expenditure, cyclical fluctuations can be lessened greatly. In
other words, variation of public expenditure is a part of the anti- cyclical fiscal
policy.

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 It is to be kept in mind that it is not just the amount of public expenditure that is
incurred which is of importance to the economy. What is equally, if not more,
important is the purpose of such expenditure or the quality of expenditure.
The quality of expenditure determines the adequacy and effectiveness of such
expenditure. Excessive expenditures may cause inflation.
 Moreover, if the government has to impose taxes at high rates there will be
loss of incentives. So, it is necessary to avoid unnecessary expenditure as far as
practicable, otherwise benefits of better economic development may not be reaped.
As a fiscal policy instrument, it may be counter-productive.

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Redistribution of Income:
 Public expenditure is used as a powerful fiscal instrument to bring about an
equitable distribution of income and wealth. There are good much public
expenditure that benefit poor income groups. By providing subsidies, free
education and health care facilities to the poor people, government can
improve the economic position of these people.

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Balanced Regional Growth:
 Public expenditure can correct regional disparities. By diverting resources in
backward regions, government can bring about all-round development there so as
to compete with the advanced regions of the country.
 This is what is required to maintain integration and unity among people of all the
regions. Unbalanced regional growth encourages disintegrating forces to rise.
Public expenditure is an antidote for these reactionary elements.

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Theories of Public Expenditures
Adolph Wagner's Law of Increasing State Activity
 Adolph Wagner, the German economist made an in depth study relating to rise in
government expenditure in the late 19thcentury. Based on his study, he propounded
a law called "The Law of Increasing State Activity".
 Wagnar's law states that "as the economy develops over time, the activities
and functions of the government increase".
 According to Adolph Wagner, "Comprehensive comparisons of different countries
and different times show that among progressive peoples (societies),with which
alone we are concerned; an increase regularly takes place in the activity of both
the Central Government and Local Governments, constantly undertake new
functions, while they perform both old and new functions more efficiently and
more completely. In this way economic needs of the people to an increasing extent
and in a more satisfactory fashion, are satisfied by the Central and Local
Governments."

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Wagner (1893) designed three focal bases for the increased in state expenditure.
Firstly, during industrialization process, public sector activity will replace private
sector activity. State functions like administrative and protective functions will
increase.
Secondly, governments needed to provide cultural and welfare services like
education, public health, old age pension or retirement insurance, food subsidy,
natural disaster aid, environmental protection programs and other welfare
functions.
Thirdly, increased industrialization will bring out technological change and large
firms that tend to monopolize. Governments will have to offset these effects by
providing social and merit goods through budgetary means.

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Wagner's Statement Indicates Following Points
 In Progressive societies, the activities of the central and local government increase
on a regular basis.
 The increase in government activities is both extensive and intensive.
 The governments undertake new functions in the interest of the society.
 The old and the new functions are performed more efficiently and completely than
before.
 The purpose of the government activities is to meet the economic needs of the
people.
 The expansion & intensification of government function & activities lead to
increase in public expenditure.
 Though Wagner studied the economic growth of Germany, it applies to other
countries too both developed and developing.

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Peacock and Wiseman Theory of public expenditure
Peacock and Wiseman (1967) suggested that the growth in public expenditure does
not occur in the same way that Wagner theorized.
Peacock and Wiseman choose the political propositions instead of the organic
state where it is deemed that government like to spend money, people do not
like increasing taxation and the population voting for ever-increasing social
services.

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There may be divergence of ideas about desirable public spending and limits of
taxation but these can be narrowed by large-scale disturbances, such as major
wars. According to Peacock and Wiseman, these disturbances will cause
displacement effect, shifting public revenue and public expenditure to new levels.
Government will fall short of revenue and there will be an upward revision of
taxation. Initially, citizens will engender displeasure but later on, will accept the
verdict in times of crisis. There will be a new level of “tax tolerance”. Individuals
will now accept new taxation levels, previously thought to be intolerable.

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 Peacock and Wiseman further stated that :-
 "The rise in public expenditure greatly depends on revenue collection. Over the
years, economic development results in substantial revenue to the governments,
this enabled to increase public expenditure".
 There exists a big gap between the expectations of the people about public
expenditure and the tolerance level of taxation. Therefore, governments cannot
ignore the demands made by people regarding various services, especially, when
the revenue collection is increasing at constant rate of taxation.
 They further stated that during the times of war, the government further increases
the tax rates, and enlarges the tax structure to generate more funds to meet the
increase in defense expenditure. After the war, the new tax rates and tax structures
may remain the same, as people get used to them. Therefore, the increase in
revenue results in rise in government expenditure.

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 The Classical Vs the Keynesian approach of public expenditure
 The classical economists believe that the government intervention brings
more harm than good to an economy and that the private sector should carry
out most of the activities. In his Welfare of Nations, Adam Smith (1776)
advocated much on the “laissez-faire” economy where the profit motive was to be
the main cause of economic developments.
 Adam Smith wrote in the 'Wealth of Nations' that the government should restrict
their activities to;
 Defense against foreign aggression.
 Maintenance of internal peace and order.
 Public development work.
 All other functions besides these were considered beyond the scope of the state &
expenditure on them was treated as unjust & wasteful.

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The classical economists assumed that the economy was perfect: it is always at full
employment level, wage rate and rate of interest is self-adjusting and as a matter of
fact, the budget should always balance as savings is always equal to investment.

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The Keynesians, on the other hand, favored government intervention to correct
market failures. In 1936, John Maynard Keynes’ (1883-1946) “General Theory
of Employment, Interest and Money”, criticized the classical economists to put
too much emphasis on the long run. According to Keynes, “we are all dead in
the long run”. Keynes believed depression needed government intervention as a
short term cure. Increasing saving will not help but spending. Government will
increase public spending giving individuals, purchasing power and producers will
produce more, creating more employment. This is the multiplier effect that shows
causality from public expenditure to national income.
Keynes believed the role of the government to be crucial as it can avoid depression
by increasing aggregate demand and thus, switching on the economy again by the
multiplier effect. It is a tool that bring stability in the short run but this need to be
done cautiously as too much of public expenditure lead to inflationary situations
while too little of it leads to unemployment.

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Principle of Maximum Social Advantage
The 'Principle of Maximum Social Advantage' was introduced by British
economist Hugh Dalton.
 According to Hugh Dalton, "Public Finance" is concerned with income &
expenditure of public authorities and with the adjustment of one with the other.
 The Principle of Maximum Social Advantage states that public finance leads
to economic welfare when pubic expenditure & taxation are carried out up to
that point where the benefits derived from the MU (Marginal Utility) of
expenditure is equal to (=) the Marginal Disutility or the sacrifice imposed by
taxation.

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Hugh Dalton explains the principle of maximum social advantage with
reference to :-
 Marginal Social Sacrifice
 Marginal Social Benefits

This principle is however based on the following assumptions :-

 All taxes result in sacrifice and all public expenditures lead to benefits.
 Public revenue consist of only taxes and no other sources of income to the
government.
 The government has no surplus or deficit budget but only balanced budget.
 Public expenditure is subject to diminishing marginal social benefit and taxes are
subject to increasing marginal social sacrifice.

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 Marginal Social Sacrifice (MSS)
Marginal Social Sacrifice (MSS) refers to that amount of social sacrifice
undergone by public due to the imposition of an additional unit of tax.
 Every unit of tax imposed by the government taxes result in loss of utility. Dalton
says that the additional burden (marginal sacrifice) resulting from additional
units of taxation goes on increasing i.e. the total social sacrifice increases at an
increasing rate. This is because, when taxes are imposed, the stock of money with
the community diminishes. As a result of diminishing stock of money, the
marginal utility of money goes on increasing. Eventually every additional unit
of taxation creates greater amount of impact and greater amount of sacrifice
on the society. That is why the marginal social sacrifice goes on increasing.

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FOLLOWING DIAGRAM :-
THE FOLLOWING DIAGRAM INDICATES THAT THE
MARGINAL SOCIAL SACRIFICE (MSS) CURVE RISES
UPWARDS FROM LEFT TO RIGHT. THIS INDICATES THAT
WITH EACH ADDITIONAL UNIT OF TAXATION, THE LEVEL
OF SACRIFICE ALSO INCREASES. WHEN THE UNIT OF
TAXATION WAS OM1, THE MARGINAL SOCIAL SACRIFICE
WAS OS1, AND WITH THE INCREASE IN TAXATION AT OM2,
THE MARGINAL SOCIAL SACRIFICE RISES TO OS2.

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 Marginal Social Benefit (MSB)

While imposition of tax puts burden on the people, public expenditure confers benefits.
The benefit conferred on the society, by an additional unit of public expenditure is
known as Marginal Social Benefit (MSB).
Just as the marginal utility from a commodity to a consumer declines as more and more
units of the commodity are made available to him, the social benefit from each
additional unit of public expenditure declines as more and more units of public
expenditure are spent. In the beginning, the units of public expenditure are spent on the
most essential social activities. Subsequent doses of public expenditure are spent on
less and less important social activities. As a result, the curve of marginal social
benefits slopes downward from left to right as shown in figure below.

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In the above diagram, the marginal social benefit (MSB) curve slopes downward
from left to right. This indicates that the social benefit derived out of public
expenditure is reducing at a diminishing rate. When the public expenditure was
OM1, the marginal social benefit was OB1, and when the public expenditure is
OM2, the marginal social benefit is reduced at OB2.

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The Point of Maximum Social Advantage
Social advantage is maximized at the point where marginal social sacrifice
cuts the marginal social benefits curve.
 This is at the point P. At this point, the marginal disutility or social sacrifice is
equal to the marginal utility or social benefit. Beyond this point, the marginal
disutility or social sacrifice will be higher, and the marginal utility or social benefit
will be lower.

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 At point P social advantage is maximum. Now consider Point P 1. At this point
marginal social benefit is P1Q1. This is greater than marginal social sacrifice S1Q1.
Since the marginal social sacrifice is lower than the marginal social benefit, it
makes more sense to increase the level of taxation and public expenditure. This is
due to the reason that additional unit of revenue raised and spent by the
government leads to increase in the net social advantage. This situation of
increasing taxation and public expenditure continues, as long as the levels of
taxation and expenditure are towards the left of the point P.
 At point P, the level of taxation and public expenditure moves up to OQ. At this
point, the marginal utility or social benefit becomes equal to marginal disutility or
social sacrifice. Therefore at this point, the maximum social advantage is achieved.

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At point P2, the marginal social sacrifice S2Q2 is greater than marginal social benefit
P2Q2. Therefore, beyond the point P, any further increase in the level of
taxation and public expenditure may bring down the social advantage. This is
because; each subsequent unit of additional taxation will increase the marginal
disutility or social sacrifice, which will be more than marginal utility or social
benefit. This shows that maximum social advantage is attained only at point P &
this is the point where marginal social benefit of public expenditure is equal to the
marginal social sacrifice of taxation.

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Public choice
Public choice is the study of political decision making.
i. It attempts to understand how public policies come to be adopted using
economic models of the impacts of policies on individuals,
ii. and models of individual political behavior under a variety of political
institutions.
iii. It tends to use rational choice models to do so, what distinguishes it from
mainstream and classical political economy.

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James Buchanan is considered the architect of public choice theory. His work
within Public Choice earned him the Nobel Prize in Economic Science in 1986.
Public choice theory focuses on people's decision making process within the
political realm. Buchanan used both the fields of economics and political
science to help develop Public Choice. The same principles used to interpret
people's decisions in a market setting are applied to voting, lobbying,
campaigning, and even candidates. Buchanan maintains that a person's first
instinct is to make their decisions based upon their own self-interest, which varied
from previous models where government officials acted in constituents' best
interest. Buchanan explains public choice theory as "politics without
romance" because, he says, many of the promises made in politics are
intended to appear concerned with the interest of others, but in reality are the
products of selfish ulterior motives. According to this view, political decisions,
on both sides of the voting booth, are rarely made with the intention of helping
anyone but the one making the decision. Buchanan argues that by analyzing the
behaviors of voters and politicians that their actions could become easily
predicted.

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Generally speaking, public choice differs from political science, because it generally
analyzes political decisions as consequences of individual choices and model those
choices using analytical models from game theory and economics.
i. Public choice theorists generally assume that all the individual involved in
politics are rational and self interested economic men and women.
ii. They then analyze how such individual might be expected to behave in various
political settings: as voters, as politicians, as bureaucrats, and so forth.
a. This is not to say that all men and women are narrow income or wealth
maximizers.
b. But, rather to say that the income and wealth affects of public policies matter to
voters, politicians and bureaucrats.
c. Of course, other broader interests also are included in "self" interest.
iii. (Roughly speaking, public choice, and/or rational politics, is the application of
economic models of human action to politics.)

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Why study public choice?
Reasons for studying public choice vary.
First, economists often model the formation of policy as if it were an exogenous
variable. For example in principles of economics courses, one often analyzes the
economic effects of a tax or subsidy without attempting to explain where those
taxes(and other regulations) come from.
a. Public Choice attempts to analyze where those policies come from.
b. This allows one to better understand the very wide range of economic
regulations as the result of deliberate action rather than mistakes by politicians.
c. A better understanding of politics also allows one to predict and profit from
policies, because most polices are adopted with their economic consequences
in mind.

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Second, political scientists often adopt public choice types of models because they
become unsatisfied with historical and broad sociological representations of
political processes.
a. They want to understand government in a more detailed way than those models
allow, and to make forecasts of government policies or growth which are based
on sharper models.
b. History and sociology may still matter, but those forces can be analyzed the
level of individual decision makers.

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Third, policy analysts from economics, political science, and law realize that all
these policies are the results of political decisions.
a. To make better policies will require better political decisions and/or better
political institutions.
b. Indeed, if the people involved are clearly reasonably smart well informed
individuals, then institutional reform may be the only method to systematically
improve policy decisions is to improve political institutions.
A better understanding of politics allows one to try to improve existing
institutions so that they on average produce "better" policies.
c. Assessing the relative merits of alternative institutions requires a clear
understanding of the effects of those institutions on human behavior--of the
sort that public choice models attempt to develop.
 (Such analyses will necessarily be abstract--hypothetical--because it is too
costly to experiment with all kinds of institutions--at least at one time and
place.)
 (History, however, provides some indirect evidence of the relative performance
of alternative political institutions.)

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Expenditure Patterns of Bangladesh Government
Parliament passed the Tk 5,23,190 crore national budget for 2019-20 fiscal
themed as “Bangladesh on a Pathway to Prosperity: Time is Ours, Time for
Bangladesh.”  
Finance Minister AHM Mustafa Kamal on June 13 placed a Tk 5,23,190 crore
largest-ever budget for the 2019-20 fiscal with a focus on developing
communications infrastructure and human resources and achieve the 8.2 percent
GDP growth.

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Expenditure Patterns of Bangladesh Government
 The finance minister proposed allocating, from the annual development
programme, 27.4 percent for human resource (education, health and related
others), 26 percent for communication (roads, rails, bridges, and related other
communications), 21.5 percent for the overall agriculture sector (agriculture, rural
development, water resources, and related others), 13.8 percent for power and
energy sector and 11.3 percent for other sectors.
 Allocation proposed for the social infrastructure sector in the proposed budget is
Tk 1,43,429 crore, and Tk. 1,64,603 crore for physical infrastructure sector of
which Tk. 66,234 crore will go to overall agricultural and rural development, Tk
61,360 crore to overall communications, and Tk 28,051 crore to power and energy.
 The overall budget deficit will be Tk 1,45,380 crore, which is 5 percent of GDP
like the previous year. In financing the deficit, Tk 68,016 crore will come from
external sources and Tk. 77,363 crore from domestic sources.

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Expenditure Patterns of Bangladesh Government
 The total allocation for operating and other expenditures is Tk 3,20,469 crore, and
allocation for the annual development program is Tk. 2,02,721 crore, while Tk 100
crore has been proposed to provide startup capital to promote all types of startup
enterprises among youths.
 A total of Tk 1,23,641 crore has been proposed for general services, which is
23.63 percent of total allocation. Tk. 33,202 crore is proposed for public-private
partnerships (PPP), financial assistance to different industries, subsidies and equity
investments in nationalized corporations, banks, and financial institutions.
 A total of Tk 79,486 crore was allocated in the proposed budget for the education
and technology sector, which was 15.2 percent of the Tk 523,190-crore budget.

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