Sustainable development: An institutional approach

Abstract

Our Common Future documented that the prevailing patterns of economic growth are ecologically not viable. A new economic policy is likely to be needed. This new policy might not be compatible with predominent (neoclassical) economic views. The notion of "sustainable development" will have to be adequately incorporated into economic theory with repercussions for, among other things, (i) the treatment of natural resources as factors of production as well as welfare determinants, (ii) valuation theory, (iii) the evaluation of market forces. The Dutch abatement policy regarding acid rain is analysed in this respect. It proved that the Dutch government gave more attention to the growth of industrial production, including the polluting ones, than to sound protection of the environment. It is argued that the integration of natural resources into the framework of economic theory is a prerequisite for environmental policy.