In particular, the term externalities is used to identify external benefit or external costs, which are benefit or costs realized by people other than the buyer and seller(Mishan, 1971).For example, if a factory dumps pollution into river, the cost associated with the pollution are not borne by the factory. But rather are externalized onto other users of the river. The private negotiation between the buyer (or employer) do not consider external benefit or external costs. Therefore, in the presence of externalities, the voluntary agreement between the buyers (or employers)and seller (or employees) may not automatically achieve the utilitarian goal of maximizing net social benefit. In such cases, government regulation is one way to try to correct the externality. For instance, in the example of river pollution. The costs associated with the pollution of the river can be internalized by imposing on the factory that produces the pollution a pollution tax set equal to the amount of the costs to society of the pollution.