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

人们期望政府解决污染、流行病和环境灾难等外部性问题，但政府本身是否以及如何产生外部性对于探索有益于社会的政策和制度改革同样重要。定义政府外部性的问题在于，政府通过监管和分配，不可避免地会由于社会偏好的异质性而导致成本和收益的不对称分配。这个问题还涉及市场交易的规则和权利，模糊了市场失灵和政府失灵之间的界限。在本文中，我将政府外部性定义为我们作为内部人参与的决策系统之外的政府行为所转嫁给我们的成本。关于什么是内部人士的看法各不相同。有些人会满足于多数决策过程中的民主公民身份。其他人可能会赞同布坎南和塔洛克基于宪法同意的自由主义和要求更高的规范理论。我认为，无论哪种情况，都会产生外部性庇护主义，即政客和特殊利益集团之间为分配利益而进行的非正式交易，这些交易发生在正式参与规范之外且违反了正式参与规范。这些都是复杂的外部因素，渗透到政策制定中，也扭曲了管理市场运作的机构。它们造成政府失灵，其理由与某些市场外部性被视为市场失灵的理由相同：(a) 成本落在外部人身上，(b) 对商品和服务的生产和交换条件产生负面影响。政府外部性同时影响治理和市场，并说明制度设计可以限制或实现的限制。