ABSTRACT
Both ‘institutional economics’ and ‘evolutionary economics’ are wide and diverse fields with long histories.1 We may describe evolutionary economics as concerned with transformative change and institutional economics with the economic role of institutions. But they each contain multiple, broad and overlapping genres and traditions. Some segments make much use of ideas from mainstream economics. Others reject them. Policy stances also vary enormously. Given this, their scope and long history is too massive and complex to be reviewed here (Furubotn and Richter 1997; Hodgson 1993, 2001, 2004; Brousseau and Glachant 2008; Rutherford 2011). Instead, I wish to draw selectively from these fields to sketch a suit able alternative approach to environmental policy. The outcome contrasts with modern mainstream economics in a number of respects, both theoretical and policy oriented. The following research agenda shows the key areas of difference with mainstream approaches in economics: (a) Building on psychological foundations rather than the neoclassical concept of rationality; (b) Introducing moral motivation as counterpoint to utilitarianism and as a key component of policy; (c) Replacing neoclassical welfare economics based on individual utility by a needs based approach to welfare; (d) Establishing an over arching evolutionary framework to encompass the economy and the ecosystem, without reducing one to the prerogatives of the other; (e) Stressing the role of institutions in environmental policy, involving institutional pluralism and experimentation. This chapter takes each of the above topics in turn and outlines the institutional and evolutionary approach adopted here. Important inspirations for this approach include Thorstein Veblen (who coined the term ‘evolutionary economics’ (Veblen 1898) and was the key founder of the original institutional economics), John R. Commons (who pioneered work on the nature and evolution of institutions), John Dewey (who made major contributions to philosophy and psychology and pioneered an experimental approach to policy), K. William Kapp (who was one of the first economists to address environmental policy) and the British heterodox economist John A. Hobson (who countered utilitarianism in his ethical approach and policy analysis). The work of Richard Nelson and Sidney Winter (1982, 2002) on economic evolution is also vital. There are also inspirations from the work of some Nobel laureates in economics such as Herbert Simon, Amartya Sen and Elinor Ostrom.2
