A conceptual note on accounting for budget internalities in public policy making

Abstract

In a recent paper, Fleming, Heinecke and Dollery (2007) developed the government failure taxonomic system advanced by Charles Wolf into a conceptual framework to incorporate positive and negative internalities for analyzing public programs and policies. However, their paper unfortunately ignored the treatment of budget internalities, often an important question in real-world policy applications. This neglect is remedied in the present note by extending the analytical framework to include this important type of internal cost.