The Public Sector

Government plays an important role in our everyday lives. Police officers, transportation infrastructure projects, schools, and military expenditures are all examples of how the government spends money. These types of expenditures are part of the public sector. The public sector operates when a government collects taxes and uses that revenue to fund public goods and services. For example, the government identifies a public need, which should be addressed, and uses its tax revenue to resolve that issue. Let us say that crime becomes a major issue in a small town in California. The government decides that it will use money from the public sector to hire two new police officers to provide a public law enforcement service. The two new police officers are able to reduce the crime rate, thereby addressing the public need.

Public sector expenditures are designed to address needs that are not able to be addressed by individual persons or businesses. No single person is going to pay for a high speed rail to Las Vegas. But on the other hand, a pool of small tax contributions from the population can generate an amount that can fund that project. The public is all entitled to use the high speed rail to Las Vegas, so this is an example of a public sector expenditure.

The government, at the local, state, and federal levels, are always making decisions about how to distribute the collected tax money. Representatives, Senators, Mayors, and Presidents negotiate this distribution through voting, lobbying, and compromising. When and if an agreement is made, then the tax money is distributed to its appropriate destinations, thus funding the public sector. Teachers, firefighters, prison guards, city workers and etc are all a part of the public sector; whereas business owners, farmers, and et cetera are a part of the private sector.