Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

E. Different Perspective on the Role of Government 
1. 
Mercantilist‘s View ―Economic nationalism‖ 
- Favorable balance of trade 
- Govt. should actively promote trade and industry. 
2. 
Doctrine of laissez ―Adam smith, John Stuart Mill, Nassau 
Senior‖ 
- Govt. should leave the private sector alone, it should not 
attempt to regulate or control enterprises. 
- Govt. is limited on 3 duties;
a. Ensure peace and order,
b. Protecting people from injustice & oppression,
c. Erecting & maintaining public works. 
3. 
Socialist View ―Karl Marx, Sismondi and Robert Owen‖ 
They suggested the reorganization of the society to address 
grave inequalities in income and condition of the working 
class. 
They advocate the government to take greater role for the 
state in controlling the means in production. 
4. 
Market System ―20th century‖ 
Govt. complements market and private enterprises. 
F. Importance of Public Finance: 
 
1. According to A.C Pigou 

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―In every developed society there is some form of 
government organization, which may or may not represent the 
members of the society collectively, but certainly has coercive 
authority over them individually.‖ 
It identifies the ―coercive nature of government‖ ―compulsion 
power‖, govt. force people to do things that they value probably not 
otherwise do, However there is no guarantee that the govt. will act 
in the best interest of the people. 
2. Public finance will ensure efficiency and equity in the program 
and activity of the govt. 
3. It provides information and knowledge on how the government 
spends the taxes they are collecting. 
G. Why do we need a Public Sector? 
Market Failures- These are market inadequacies or areas 
that the market or private sector of the economy fails to address 
and fail to satisfy all the needs of the society. 
1. 
Market failure in providing the society‘s desired set of goods and 
services. 
2. Market failures in the distribution of income and poverty. 
3. Market failure in achieving stability in employment and prices. 
Reduces fluctuation in economic activities (business cycles, 
boom, peak, recession, and depression).