Government and Budget process

12418Thread Outline: Use bolded statements as headings in your thread.

I. Summarize the role of the government in the budget process.

II. Analyze the role of the government in correcting externalities and other market failures.

III. Justify the use of taxpayer resources to correct externalities and other market failures.

Externalities are a consequence of a governmental activity that affect other parties without this being reflected in the cost of the goods or services involved. Externalities by nature often are environmental. Some examples of negative externalities include:

Air pollution
Water pollution
Farm animal production
Passive smoking
Traffic congestion
Noise pollution
Market failure is an inefficient allocation of resources. Government failure occurs when government intervention results in a more inefficient and wasteful allocation of resources.