Finance

Hugh Dalton Objective Tests To Estimate Maximum Social Advantages

The major drawback of the principle is that in spite of its theoretical importance, it is actually possible to translate it into practice because the Maximum Social Sacrifice (MSS) and Maximum Social Benefits (MSB) cannot accurately be measured. Due to the shortcomings and various criticisms, Dalton has put forth certain objective test of the principle of maximum social Advantage.

Objective Tests To Estimate Maximum Social Advantages:

First, the state should ensure law and order situation in the country and the defence of the country from external aggression. If it is so, the public expenditure is justified.

 Secondly, the increased public expenditure is desirable if it increases the agricultural or industrial production or if the corporate tax encourages Capital formation, investment and industrial progress.

 Thirdly, the public finance operations are justified if they improve the pattern of distribution of wealth and income of the society. If the imposition of a tax reduces inequality of income, or if the public expenditure improves the economic and social conditions of the poor, these are said to be justified.

 Fourthly, another test of maximum social advantage is the effect of the various operations on the future generations. The state has a long life and is also a trustee of the present as well as future generations. The finance measures are desirable if they safeguard the interest and prosperity of future generations as well.

 Fifthly, the public finance operations should be aimed at stabilizing the level of economic activity and employment. To that end, the government should impose heavy taxation during inflation and during depression, the public expenditure should be increased and a relief in taxation should be provided.

 These tests will help us to judge whether a public finance operation is justified or not. As we cannot measure each and every measure in term of its plus and minus effects, we should take a Comprehensive view.

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