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The proposal that the budgets of governments and other organizations should be designed starting from first principles, defining the aims of the organization and adopting the best method of achieving them. This is contrasted with the usual budgetary procedure, which starts from the previous period’s budget and makes marginal changes. As real world organizations are committed to contracts with their employees and suppliers, and are affected by the public’s expectations about the prices they should charge and the services they should provide, zero-base budgeting is difficult to achieve.
Reference: Oxford Press Dictonary of Economics, 5th edt.
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