Market Failures and Public Sector Budgetary Principles

Market Failures and Economic Externalities

The first market failure is the existence of external effects, also called externalities. There are two types: positive external economies, such as the employment generated in a locality by settling a business, and negative external diseconomies, such as pollution or large landfills in cities as a direct consequence of production methods and consumption.

The second flaw involves public goods, which are offered together in an indivisible and non-exclusive manner in their use.

The third failure is the assertion of the existence of imperfect competition in markets.

The fourth failure, from the positive side, is the persistence of inequality in the distribution of income and wealth, which questions the possibility of an equitable distribution and captation of these resources.

Structure of the Public Sector

The public sector is structured by the State, autonomous communities, and local authorities.

• The State is divided into:
  • General Administration of the State
  • Social Security
  • State societies
• The General Administration of the State is divided into:
  • Central organs
  • Public agencies
  • Other statutory bodies
• Public bodies are divided into:
  • Autonomous agencies
  • Public corporate bodies

The Welfare State and Universal Coverage

The Welfare State provision is the method established by Western European countries to address the need for universal coverage of public departments and the essential safeguards against a lack of protection.

General Administration and Public Budgets

A budget is the quantification of the costs to be undertaken by an entity in the public sector, with the anticipation of the revenue to cover them in a given period, usually a calendar year or fiscal year. It provides a systematic overview and encryption, made at regular intervals, of the estimates of revenue to cover those spending requirements.

Core Budgetary Principles

Budgets are executed according to some basic budgetary principles that increase efficiency and control by the ruling houses over what has been planned. Among these basic principles are:

• Competition: Involved in the preparation, approval, and control by the government.
• Universality: It captures all income and expenditure for the agencies participating in the general State budgets.
• Seasonality: Established regularly with a recovery term for the budget in the economy within the calendar year.
• Advertising (Publicity): Summarized in the discussion, interpretation, and approval through parliamentary debate, broadcast by the mass media so that it can serve citizens as a mass orientation for driving.
• Specialty of Expenditure:
  • According to purpose: All resources targeted for a particular purpose must be used for that goal.
  • According to amount: Fixed amounts cannot be increased.
  • According to temporality: Spending is only for the authorized period.