Wagner's hypothesis and peacock-wiseman hypothesis

Wagner's hypothesis of public expenditure
Peacock-Wiseman hypothesis

1. UNIT:- 3 PUBLIC ECONOMICS UNIT:- 3 Public Expenditure Nishali b. m.a. economics semester 1 Wagner's Hypothesis and Peacock-Wiseman Hypothesis

2. Wagner's Hypothesis Of Public Expenditure Introduced by Adolf Wagner – German political economist (1835-1917) He pro­pounded an empirical law to analyses and explains the trend in the growth of public expenditure. Wagner hypothesized a functional relationship between industrial­ization and the relative importance of public sector activity. Wagner’s Law of Increasing State Activity.

3. Wagner's present his law in above mentioned words

4. Intensive increase means expansion of traditional functions of the State on large scale. Extensive increase means relates to coverage of new welfare functions.

5. Public Expenditure Continuous Increases Due To 3 Reasons Expansion of traditional functions Coverage of new functions Expanding sphere of public goods

6. Factors Affecting Public Expenditure Activities Both demand side and supply side of public expenditure activities. Demand side of public expenditure activities. Supply side of public expenditure activities. Wagner believed that public expenditure will increase faster that the increase in per capita income of people. 

7. Formulation of Wagner's Law is that " As per capita income rises in industrializing nations their public sector will grow in relative importance."

8. Criticisms of Wagner's Hypothesis  Lacks interdisciplinary approach Lacks comprehensiveness Ignores the influence of war Stresses a long term trend of public economic activity

9. Peacock and Wiseman Hypothesis This hypothesis regarding the growth of public expenditure was put forth by Peacock and Wiseman, in their empirical study of public expenditure in U.K. for the period 1890-1955. Peacock and Wiseman emphasize the time pattern of public spending trends rather than striving for a genuine positive theory of public sector growth. Their analysis involves three related ele­ments. These are displacement, inspection and concentration ef­fects.

10. Displacement Effect The figure reveals that as the social disturbance cause a relative expansion of the public sector, the dis­placement effect which occurs helps to explain the time pattern by which the government growth takes place.

11. Inspection Effect Inspection effect is the inadequacy of revenue in comparison with the ‘required’ public expenditure.   It refers to the apparent tendency for the central government economic activity to become an increasing proportion of total public sector economic activity, when a society is experiencing economic growth. Concentration Effect

12. THANK YOU