Elements of a Neoinstitutional Environmental Economics

A sharper contrast than that provided by a comparison of neoclassical and institutional approaches to the environment is difficult to imagine. The neoclassical approacfi, couched in a mechanical, reductionist worldview where everything is merely the sum of its parts and all values reduce to simple pleasure or pain, is premised on exogenous, independent utility functions, private ownership of everything valuable, an "efficient" but static property rights structure, and a system of perfectly competitive markets. The institutional approach, couched in an organic, holistic worldview where few things are merely the sum of their parts (some are more, some are less, and some are incommensurable) and values are hierarchical and often conflicting, is premised on endogenous, interdependent "preferences" of individuals and groups, socially defined and limited private ownership, a variety of evolving entitlements, and a political economy where political and economic power mix with market forces in a process that serves both private interest and social need (although it may do neither well). The organic, holistic worldview of institutionalists is consistent with ecology, which studies the relationship between organisms and their environment, and teaches the interdependence and interconnectedness of living systems. Although ecology began from what economists would call a "micro" approach, analyzing specific species as they interact with their environments, modem ecology also teaches interdependence on a grand scale. Apropos is John Muir's dictum and the Sierra Club