Neoclassical and institutional approaches to development and the environment

Abstract

Institutional economics is suggested as a more fruitful approach to environmental problems than the now dominant neoclassical paradigm. The historical background of institutionalism in the United States and Europe is given, as well as the main characteristics of this approach, i.e. holism, emphasis on institutional arrangements, pattern modelling, and emphasis on the political element of economics. Differences between neoclassical and institutional economics are elaborated with respect to the concept of economics (reductionist versus holistic), the approach to decision making (aggregated versus highly disaggregated), and the view of social and institutional change (public choice versus actor-network approach).