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Agency costs in the government may include the likes of government wasting taxpayers money to suit their own interest, which may conflict with the general tax-paying public who may want it used elsewhere on things such as health care and education. The literature however mainly focuses on the above categories of agency costs.
In economic theory, the principal-agent approach (also called agency theory) is part of the field contract theory. [36] [37] In agency theory, it is typically assumed that complete contracts can be written, an assumption also made in mechanism design theory. Hence, there are no restrictions on the class of feasible contractual arrangements ...
Public finance refers to the monetary resources available to governments and also to the study of finance within government and role of the government in the economy. [1] Within academic settings, public finance is a widely studied subject in many branches of political science , political economy and public economics .
Regulatory capture theory has a specific meaning, that is, an experience statement that regulations are beneficial for producers in real life. So it is essentially not a true regulatory theory. Although the analysis results are similar to the Stigler model, the methods are completely different.
Likewise, in finance literature, the acknowledgment of information asymmetry between organizations challenged the Modigliani–Miller theorem, which states that the valuation of a firm is unaffected by its financial structure. It challenges the theorem as one of the key assumptions is that investors would have the same information as a corporation.
[3] [4] There is a later version of the benefit theory known as the "voluntary exchange" theory. [5] Under the benefit theory, tax levels are automatically determined, because taxpayers pay proportionately for the government benefits they receive. In other words, the individuals who benefit the most from public services pay the most taxes.
Bureaucratic drift in American political science is a theory that seeks to explain the tendency for bureaucratic agencies to create policy that deviates from the original mandate. [ 1 ] [ 2 ] [ 3 ] The difference between a bureaucracy's enactment of a law and the legislature's intent is called bureaucratic drift.
A government's budget is a comprehensive financial plan that outlines its priorities and objectives for a given period. As a policy document, a government's budget is designed as a plan for implementing its policy. Traditionally, budgets served as a more rigid tool to implement policy in a retrospective setting.