Question

Difficulties in implementing principle of maximum social advantage

Answer 1

The fundamental problem is that of planning the budget efficiently. The following three fundamental principles of budget operations help the state to achieve the principle of maximum social advantage: The marginal social benefit of public expenditure and the marginal social sacrifice of taxation must be equal.

The difficulties in implementing principle of maximum social advantage :-

1. Difficulties in measuring social benefit

2. Unrealistic assumptions

3. Neglect non-tax revenue

4. Lack of divisibility

5. Large budget size

6. Assumption of static condition

7. The effect of budgetary policy spill over to the future

8. Inconsistent methodology

9. Misuse of government funds

10. Contra-cyclical measures