Difference Between Public And Private Expenditure

Public expenditure is similar to private expenditure in some respects. But in many other respects, it is quite dissimilar to private expenditure. Similarities and dissimilarities are discussed below. Public and private expenditures are similar in following respects:

Similarity Between Public and Private Expenditure :

(i) Both the individual and the State try to obtain maximum satisfaction out of the expenditure. Both like to obtain greatest results at the minimum of cost. In other words, maximization of returns is the common principle in public and private expenditure.

(ii)The individual and the State adjust their income to expenditure. If, for some reasons, the expenditure of an individual exceeds his income, he will try to earn more by putting hard labor or by sacrificing leisure. Likewise, the government may impose more taxes if public expenditure exceeds its current tax revenue.

Dissimilarity Between Public and Private Expenditure :

Public and private  expenditure differ on various counts as follows-

i)    The purpose of public expenditure is the welfare of the society or the country but the motive of private expenditure is limited to the welfare of himself and his family.

(ii) The individual always makes an attempt ‘to adjust his expenditure according his income whereas the government attempts first to make an estimate of total expenditure and then devise methods of raising the required revenue through various means.

(iii) The plans of private expenditure are generally short termed and are made only for the near future. Public expenditure on the other hand. is planned with the objective of long term benefits to the society.

(iv) The benefit of private expenditure can be measured with the help of the marginal utility of goods and services purchased. The benefits accrued to a private firm can also be measured in terms of equality between marginal cost and marginal revenue. But the measurement of benefits, accruing from the public expenditure is not possible.

(v) Flexibility in public expenditure is much more the the private expenditure because the latter cannot be squeezed later on whereas the private expenditure can be increased or decreased according to the will of the individual.

(vi) Private expenditure is motivated by private profits where- as the main motive of public expenditure is public welfare.

Thus, it is clear that private and public expenditure differ in respect of coverage otherwise there is no fundamental difference between them.