Foundations of public financial management: theories and concepts

This chapter explores the antecedent and evolving foundations of public financial management as a self-aware professional area of practice and academic discipline. A critical observation is that the public sector pursues its objectives in concert with private actors, in markets that are largely operated as private institutions (albeit subject to public regulation). This chapter argues that difficulties in the development of a clear and coherent theory of public financial management stem from deeper problems in conceptualizing the public and private sectors as separate and distinct realms. The scope of public finance needs to be expanded to include concerns that reach into adjacent fields including the conditions of money and credit open to governments, national monetary sovereignty, regional and local government subordination to national governments (even in federal systems), the effects of budget constraints across levels of government, and use of synthetic financial instruments as means to stretch, or otherwise overcome traditional budgetary limits.