What is the relationship between negative and positive externality?

A negative externality exists when a cost spills over to a third party. A positive externality exists when a benefit spills over to a third-party. Government can discourage negative externalities by taxing goods and services that generate spillover costs.

for many centuries there were important factors which the economies of the muslim empires developed increasingly. they applied economic procedures in production, investment, finance, taxation and property. they used to tax certain goods (for example: harvest), they charged interest on money lent, they signed contracts with merchants; they relied on a common currency, and they used checks as well as promissory notes. with the money collected by means of taxation, the government provided the needy with an income. in addition, trading networks covered huge distances, so far regions started to have contact and exchange goods. this trade network covered areas of asia, africa and europe.