Functions of Public Finance
There are three major functions of public finance, The Allocative Function, The Distribution Function, and The Stabilising Function.
1. Allocative Function: In the present century, expenditure of government has increased significantly. Functions, like promoting business, betterment of agriculture sectors, fluency in industrial sectors, access to good education and better health facilities, etc., involve a lot of expenditure. The allocative function of public finance undertakes the optimal allocation of resources to various heads. By optimally allocating the resources, the government can maximise welfare and minimise the overall cost.
2. Distribution Function: One of the major concerns in almost all developing countries is the unequal distribution of income. The distribution function of public finance tries to distribute the income equally among various societies of the country. The income, expenditure, and borrowing aspects of government with respect to equal distribution are taken care of under this function.
3. Stabilising Function: Present times are affected by the dynamic environment more than ever. Various phases, like booms, depression, etc., affect everyone causing damage to the economy. This type of instability is eliminated, and/or reduced under the stabilising function of public finance. Correlation of taxes, expenditures, and debt policies are some of the practices to avoid instability.