Addressing Externalities

A key role of government is to address the negative externalities of market interactions. Governments enforce regulations on businesses that ensure that workers are kept safe in the workplace, consumers are protected from dangerous substances, and that the environment is not destroyed by businesses looking to make a profit. 

Governments act in the interests of the whole society - at least in theory - rather than just the economy. So while governments are interested in an invested in economic growth, private profits, and the performance of the economy, they are also invested in keeping citizens safe, protecting the environment, and ensuring that employers treat their employees fairly. 

Regulations place demands on businesses - OSHA rules keep workers safe in the workplace, ensuring they are not hurt while at work. EPA rules limit the amount of pollution that businesses can produce while they make their products and engage in trade. Labor regulations ensure that workers have the right to organize, bargain, and strike for better working conditions, pay, and benefits. 

None of these legal protections is created by the market itself, and all markets are regulated by governments in the interests of the public.

What role do governments play in addressing externalities created by market transactions? 

Governments address externalities created by market transactions by...

For example...

Another example is...

From these examples we can see that...