In an evaluation, discuss how the role and function of budgeting has been utilized to correct externalities and other market failures. Additionally, justify the use of taxpayer resources to correct externalities and other market failures.

Thread Outline: Use bold 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.

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