Exploring the Approach of Institutional Economics to the Environment

A neglected aspect of ecological economics is the link to the social context. The socio-economic perspective extends standard economic analysis into concerns for distribution, ethics and the power of institutions which form and implement policy. We explore how an institutional perspective on ecological economics might operate and provide a distinct methodology. In order to understand the institutional approach and how it differs from the standard economic methodology a historical overview is provided. This allows us to identify key characteristics. Theories applying the institutional approach to environmental problems are then discussed. Our main aim is to bring together the key characteristics of institutional economics with reflections upon previous environmental applications to synthesise the basic principles of a socio-economic approach to the environment. This then provides the opportunity to investigate how far the institutional approach to environmental policy differs from the general approach provided by ecological economics in terms of the preconceptions and values identified with each of these perspectives. The paper concludes by discussing how an institutional economics methodology might be integrated with an ecological economics framework of analysis. The two approaches are found to have more in common with each other than either has with a neo-classical economics approach. A socio-economic perspective is seen as essential to developing effective policy and the institutional approach provides insights into how this might be brought into future analysis of environmental problems. However, several areas are identified where research is required if the two approaches are to be successfully integrated