FINANCE' (Lat. finantia, payment. derivative of finare, to pay a fine, from Lat. finis. end, settle ment). A term which is popularly applied to the management of transactions involving large slims of money, such as the floating of great corporate enterprises and the stock-exchange transactions incident the-eto; or. on the other hand, the ad ministration of the receipts and expenditures of nations, States, er cities. The operations first named are frequently designated 'private finance,' the latter is Spoken of as •plibli,• or simply finance. The rules of private Mums., if such there be, have not yet been formulated, and it is indeed only in recent year:, that yew manic writers have sought to eoi4dinate the rules and principles of public finance into a sci ence of finance. Scientific usage restricts the term public finance to questions affecting the ex penditnre, revenue, and debt of governments, although in a popular SPIISP it is applied to (11.11!S• tions of monetary and banking piney.
The science of finance is much younger than the art of finance, and this dates only from the rise ei the modern State. In the latter, public needs are met. by an expenditure of money drattit from the people by taxation and other methods, while in the moll:rya] State such needs were largely ;net by direct personal services. These have been almost entirely superseded by the obligation to pay taxes. and by the payment in money from the public treasury for such services as are required; but there are reminders of the older system at the present, time. Of these the most conspicuous is the obligation to bear arms; but a homely illustration is found in the road taxes of rural communities, which are so often satisfied by actual labor upon the roads.
While questions of public policy respecting the fiscal operations of the Government form a large part of the literature of economies, it was not until the latter half of the nineteenth century that the general use of the term finance became common among English writers to designate this group of phenomena. The importance of this
development lies in the fact that before it took place all these questions were regarded from the standpoint of the individual, instead of that of thc State. The former is apt to be one of hostil ity, the latter at least of sympathy. While ear lier writers emphasize the dangers of taxation, the oppression which it causes, the disturbances in the economic life of the community which it involves, later writers recognize certain normal activities for the Government. the satisfaction of its needs by taxation as appropriate, and look upon the payments of the citizens. not as sums wrung from them by extortion, but as assess ments for the maintenance of a system essential to the general well-being. This attitude has led to a fuller investigation of the facts concerned, and furnishes a central point about which they can be eniirdinated.
The development of a science of finance as here indicated has pointed out the contrasts as well as likenesses between the management of the money affairs of States and individuals. To both the rule of economy and caution applies equally, however great. the temptation in public affairs to neglect it. liy its sovereign power over the citizens, the State seems to be in a posi t ion to take all it This has led to the hypo thesis laid down by certain writers that in private economy expenditure is measured by income. but in the economy of the State income is measured by expenditure. The epigrammatic statement is not wholly true. since among individuals ex peilitures are made by inroads upon capital when income does not suffice, while in the State expenditures are curtailed and more frequently postponed for lack of sufficient in come. Yet, within limits, such a contrast exists, and marks the divergent tendencies of public and of private economy.