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Positive and Negative Externalities Week 2 Discussion 1

The Government monitors and regulates businesses in both the public and private sectors, to ensure they are complying with Federal, State and local rules and regulations.  The result of these regulations can be referred to as positive or negative externalities.  

Provide an example of positive and negative externalities in the police (public) sector. What kind of impact can these externalities have on a budget and the people responsible for creating the budget?
Our text

Mikesell, J. (2011). Fiscal administration, analysis and applications for the public sector (8th ed.). Boston, MA: Wadsworth/Cengage.

Harris, P. (2009). What's a crime prevention officer worth? Sheriff, 61(6), 18-19. Document ID: 1871741921.

An externality is referred to as a benefit or a cost that emerges from an activity and it has an effect on a third party who did not choose to incur the cost or benefit for example the society. In general terms they are the costs and benefits that are linked with the production or consumption of a good or service. Externalities can either be positive or negative based on the nature of the effect on the third party. Externalities that are negative cause too much of a product to be produced while positive externalities too little products to be produced.

Public goods are those that are hard to prevent people from benefiting from such as clean water, national defense, clean air, law enforcement and many others. These are examples of positive externalities. In many circumstances negative externalities occur (Lavenex & Uçarer, 2003).

Examples of Externalities are as follows
Positive externality

Immunizations, such as a flu shot, etc., offer a positive externality to third parties in that it aids in preventing the spread of illness to the general public. A company offers funds for its employees to acquire expert training. By doing so, the company can be benefited by improved production which also assists the customer. Moreover, this can benefit the society as large by advancing the level of education as well as the quality of life. Improving driving habits will decrease the risk of accident for everyone on the road as well as eventually reduce insurance premiums of the driver. “

The fear of crime is always there. But, a community’s degree of involvement with law enforcement activities can make all the difference. The role of  citizens is essential  in preventing crime is “important since they may alert authorities, provide evidence, and denounce offenders” (Ferrer, 2008, p.2).

Negative externality:

A major example of negative externalities is pollution. The producer and consumer normally finance the goods produced while the society incurs the cost of pollution that is introduced into the environment as a product is being manufactured and this is what makes it a negative externality.  Raising the amount of coal burned to cause electricity hence raises the level of pollutants released into the atmosphere that can lead to things such as global warming, acid rain and smog. These externalities have an impact on the budget as well as the people creating the budget since the costs and have to be internalized. The market has to spend additional funds in order to compensate for damages that will be incurred hence there will be an impact on the budget (Papandreou, 1998).

Negative effect occurs when the rate of community involvement is lower than the crime rate”

Negative externality Sleep deprivation in police officers. This can have a huge effect on the dissions a police officer makes.


Lavenex, S., & Uçarer, E. M. (2003). Migration and the externalities of European integration. Lanham, Md. [u.a.: Lexington Books.

Ferrer, R. (2008, October). [PDF] Breaking the law when others do: A model of law ... Retrieved from www.econ.upf.edu/.../Rosa%20Ferrer%20BTLWOD%20Revised%20version. pdf - Similar

Papandreou, A. A. (1998). Externality and institutions. Oxford: Clarendon Press.

Not sure if I am on the right track with this and can’t think of a Negative Externalities regarding police. make any changes you feel necesary thanks

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