Government externalities

Abstract Governments are expected to tackle externalities such as pollution, epidemics and environmental catastrophes, but whether how governments themselves generate is a question equally important for exploring socially beneficial policies institutional reforms. The problem with defining government that governments, through regulation distribution, inevitably allocate costs benefits asymmetrically due preference heterogeneity in society. This also concerns the rules rights governing market transactions, blurring boundaries between failure failure. In this paper, I define passed on us by actions taken outside decision-making system which we participate insiders. Views about what being an insider differ. Some will be content democratic citizenship majoritarian processes. Others may subscribe Buchanan Tullock’s liberal more demanding normative theory based constitutional consent. either case, argue, there generated clientelism , namely informal deals politicians special interests distribution of occur outside, violation of, formal norms participation. These complex externalities, infiltrating policymaking distorting institutions operation markets too. They create same grounds some considered failure: (a) fall outsiders (b) negatively affect terms production exchange goods services. Government influence both governance simultaneously illustrate limits design can constrain or achieve.