Budgeting; Allocation of Public Resources
In 1940, V.O. Key laid out the basic budgeting problem that economists are yet to solve: ‘on what basis do we decide to allocate resources to one program and not another given the scarcity of resources?’ According to Keys, solutions to this problem lie in economic theory or an improved understanding of the institutional arrangements within which decisions for resource allocation are made (Fozzard, 2001). From these two perspectives, economists have proposed several guiding principles as the basis for resource allocation in the public sector. This text discusses five of these bases.
The Public Goods Basis
This basis assumes that the market is perfect and that the forces of demand and supply adjust accordingly to allocate public resources in an efficient manner without the need for public intervention (Fozzard, 2001). Public intervention would only be justified in the event of market failure, where the forces of demand and supply would result in an inefficient allocation of resources (Fozzard, 2001). The appropriate response from the public sector in the case of market failure will depend on the degree and type of market failure that the response seeks to correct (Fozzard, 2001).
The Marginal Utility Basis
Classical economists argue that an individual will seek to equalize the marginal utility gained from each unit of spending across the range of consumable goods and services (Premchand, 1989). The marginal utility basis argues that the public sector should allocate resources among activities using the same basis. In essence, resources in the public sector are to be distributed among different uses such that the marginal rate of satisfaction for all the uses is the same (Premchand, 1989). For instance, when allocating...…social distribution of the costs (taxation) and benefits (expenditures) of public interventions using benefit incidence analysis. The greatest resources are thus allocated to interventions with the highest distributional impact (Lane, 2000).
In my view, the equity basis is the most appropriate approach for allocating resources in the public sector. The approach is preferred because it considers the social distribution of benefits. In so doing, it provides a more accurate view of what social group benefits or loses from a given policy, and the extent of their gain or loss (Fozzard, 2001). The price of a commodity or intervention measures the private benefit that an individual attaches to the intervention. The price, therefore, does not take into consideration the social benefits of the intervention thereof (Lane, 2000). Thus, prices do not capture the actual costs and benefits and may not allocate resources…
References
Fozzard, A. (2001). The Basic Budgeting Problem: Approaches to Resource Allocation in the Public Sector and their Implications for Pro-Poor Budgeting. Overseas Development Institute. Retrieved from https://www.files.ethz.ch/isn/100340/wp147.pdf
Lane, J. (2000). The Public Sector: Concepts, Models and Approaches. Thousand Oaks, CA: Sage.
Milakovich, M. E., & Gordon, G. J. (2013). Public administration in America (11th ed.).Belmont, CA: Wadsworth Publishing.
Premchand, A. (1989). Purposes of Budget and Determinants of Public Expenditures. IMF. Retrieved from https://www.elibrary.imf.org/view/IMF071/02862-9780939934256/02862-9780939934256/ch02.xml?language=en&redirect=true
Budget Deficit Government Budget What are the consequences of an ever-burgeoning federal deficit and debt? Will there ever be a solution or compromise? One of the most hotly-contested issues in contemporary American political life is how to deal with the current budget deficit. Despite running surpluses during the 1990s, the current budget is widely considered out of control by both Democrats and Republicans. The reasons for the deficit include two costly wars abroad
Government Accounting Office in America (GAO) This is an examination of the Government Accounting Office in America. The writer discusses the history, purpose and background of the GAO as well as the duties that the office is charged with performing. The writer then analyzes literature that illustrates the office in action. The final discussion revolves around the question, "Is the office effective or is it a waste of money." There were
Government Budgeting for Kelsey: Budget Changes Needed to Better Protect and Serve the Community "We're not going to use the budget as an excuse. We're not crying about it. But I'm going to push as hard as I can to get as many people on the streets as I can. We need all hands on deck," so were the words of the Philadelphia Police Chief when faced with a similar situation
The assessment becomes biased, especially when a PSC is compared to the PPP bid of a willing company. Moreover, if un-affordability and budgetary limits exclude traditional procurement, the project will not progress. This is the case when the submitted bids do not reflect value for money and there is no delivery. This situation and the strong desire to deliver may indicate an inclination to bias the PSC to make
Public Sector Unions Public-Sector Unions in United States HISTORY OF PUBLIC SECTOR UNIONS COSTS OF PUBLIC SECTOR UNIONS OVER THEIR BENEFITS DEMOGRAPHICS OF LABOR IN AMERICA EDGE OF PUBLIC-SECTOR UNIONS OVER PRIVATE ONES THE HIDDEN COSTS OF PUBLIC UNIONS THE DISTORTION OF DEMOCRATIC POLITICS STATE UNIONS VS. FEDERAL UNIONS THE FUTURE OF PUBLIC SECTOR UNIONIZATION HISTORY OF PUBLIC SECTOR UNIONS Labor unions are seen as the representatives of the labor employed in our industries and are known as the advocates of
Public Private Comparator Public Sector Comparator (PSC) in the Public-private partnership (PPP) Process Increased global financial pressures have caused many government entities to cut costs in any way possible. One way is to outsource services or projects to private companies. However, when comparing costs, the public sector frequently bases its cost calculations for a project by omitting certain types of factors. These can include employee benefits, utilities, or total administrative costs. As
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now