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Peter Bradley1 A REVIEW OF INSTITUTIONAL ECONOMICS FRAMEWORKS FOR EXPLORING SUSTAINABLE DEVELOPMENT Peter Bradley1 1Department for Accounting, Economics and Finance, University of the West of England, Frenchay Campus, Coldharbour Lane, Bristol, UK, BS16 1QY. Email: [email protected]; Corresponding author: Peter Bradley Economics Working Paper Series 10 (Jan 2021) A REVIEW OF INSTITUTIONAL ECONOMICS FRAMEWORKS FOR EXPLORING SUSTAINABLE DEVELOPMENT Abstract A reorientation of institutions and governance to ensure sustainable development is called for by the WCED (1987) and later reports on sustainable development. Although policy actions are being taken by many governments around the world on sustainable development, the application of institutional economics to sustainable development is arguably still in its infancy. Institutional economics has great potential to inform and provide far reaching insights into understanding and progress institutional and governance challenges for sustainable development. In order to advance and contribute to the field, this paper conducts a systematic review of available frameworks from New Institutional Economics and Classical Institutional Economics that address sustainable development. As yet, there has not been such a review of frameworks. The papers contribution is to systematically collate and synthesise the literature, and from analysis draw out key characteristics, themes and clusters and subsequently identify key research gaps. 1. Introduction New institutional economics and its forerunner (classical institutional economics) have made important contributions to sustainability research such as the conceptualisation of environmental problems as instances of interdependence and the acknowledgement of positive transaction costs as critical insights into the nature of environmental problems. Understandings of plurality of behavioural motivations and limited cognitive capacity are also identified as having important implications for analysis that can inform environmental decision making (Paavola and Adger 2005). Key early works on the institutional economics of the environment and sustainability include (but are not limited to) Kapp 1969 on the subject of social costs. Swaney 1987 who identifies the role of institutional economics in addressing environmental and sustainability challenges; Söderbaum (1990 and 1992) where an exploration of neoclassical approaches and institutional approaches to the environment are undertaken and Costanza et al 2001 on institutions, ecosystems, and sustainability. More recently, established authors such as Arild Vatn have provided fundamental insights in the field, publishing key works on the subject (Vatn 2005; 2010, 2012, 2015 a and 2015b) as well as Clive Spash and other less established authors. The aim of this paper is to conduct a review of available frameworks from New Institutional Economics and Classical Institutional Economics that address sustainable development (or aspects of it). As yet, there has not been such a review of frameworks. The current paper addresses this gap from a review of journal published articles. The specific research questions of the paper are as follows: 1. What institutional economics frameworks exist in relation to sustainable development? 2. What are the range and nature of frameworks found? And; 3. What are some of the key gaps and opportunities for developing the area in relation to sustainable development? 2 Definitions and research approach Authors define institutions in somewhat different ways in the literature, the current study applies a definition by Dequech (2002). Dequech (2002) identifies institutions as being partly seen as constraints, as cognitive models, or as normative structures. The Brundtland definition of sustainable development is currently the most widely accepted starting point for scholars and practitioners focused on environment and development dilemmas therefore we apply this definition: ‘‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’’ (World Commission on Environment and Development, 1987). This is applied alongside the three main aims of sustainable development: 1. Economic aim: improved equity in resource distribution across and within societies; 2. Social aim: improving human well-being; and 3. Environmental aim: development that stays within environmental constraints and maintains ecological integrity over intergenerational timescales (Sneddon et al., 2006). The latter adjoining aims help maintain focus. For this review, we followed a systematic review approach that Ostrom (2011) apply for reviewing in relation to institutional economics. We now lay out the approach. Firstly, a systematic review of peer- reviewed journal papers was conducted from searching scholarly databases such as Scopus, ScienceDirect, Business Source Complete, Wiley online, Emerald, Sage journals online, SpringerLink, Taylor & Francis amongst others. Searches were conducted on these database as of October 2019 to find literature documenting relevant institutional economics frameworks in any context or type of research. Search strings were guided by the search terms “Institutional economics sustainability,” “Institutional economics environmental”, “Ecological institutional economics”, “Institutional economics framework sustainability”, “Institutional ecological economics framework”, “Institutional economics frameworks environmental” and resulted in the following search results: Table 1: Search results Search term Total search results “Institutional economics sustainability" 103,506 results “Institutional economics environmental” 275,256 results “Ecological institutional economics” 76879 results “Institutional economics framework sustainability” 107,158 results “Institutional ecological economics framework” 76,658 results “Institutional economics frameworks environmental” 253,467 results In general, for search results once the first one hundred articles were assessed, the author found that there were very few relevant papers, apart from the search on the terms “Ecological institutional economics” and Institutional Economics Frameworks sustainability” where the analyst checked articles up to 184 and 221, as quite a number of relevant articles were found after the first 100 results. This second short list was refined manually by reading titles and abstracts, and the full text if necessary, to check for applicability to the scope (i.e. little discussion of institutional economics and sustainability/environment focus). From this overall search and analysis one hundred and twenty articles were downloaded and saved in a folder to conduct the next stage of the review process. Articles were then analysed to make sure that they were 1. Presenting or significantly extending a framework, with there being a reasonable degree of incorporation of institutional economics or new institutional economics into the paper. This resulted in twenty four frameworks being shortlisted for in depth systematic review. Each article was then read, and evaluated, based on the following criteria: 1. Author and date; 2. Primary focus of frameworks; 3. Main contributions of the framework; 4. Overview of characteristics of the framework; 5. Understanding of institutions; 6. Aspects of SD addressed (in line with the three aims outlined). And finally, 7. Applicability across sectors. 3.1 Frameworks found: focus, contribution and use as tools This section starts by identifying the primary focus of various frameworks reviewed, this is summarised in Table 2. Table 2: Summary table of studies, theoretical lens and focus Cluster by broad theory Study Primary focus of framework Neoclassical Dzeraviaha 2018 Neoclassical framework to address natural resource and environmental problems Ostrom 2011 The Institutional Analysis and Development (IAD) framework, focus on Common Pool resources Anderies et al 2004 Design principles and costs and benefits of formal institutions in SES Rudd 2004 Sustainable livelihoods apprach with IAD to address fisheries management. Gerber et al 2009 IRR, property rights and policy analysis to address natural resource use Feiock 2013 Government sector and public goods, policy and governance options to mitigate problems, risk and transaction costs. DeCaro et al 2017 Framework is primarily focused on formal institutions (aspects of law) and environmental governance. The focus is on adaptation and governance, not the study of institutions on their own. The institutional design principles set out. Clement 2010 Extending the IAD to consider power Ostrom 2009 SES Framework McGinnis and Ostrom 2014 Minor extensions of the SES Framework Léopold et al 2019 institutional interventions and their impact on fisheries Bettini et al 2015 Extend IAD to incorporate institutional work theory NIE: Common pool and social ecological systems systems ecological social and pool Common NIE: Kolinjivadi et al 2014 Institutional aspects of payment for ecosystem services, water related Garrick et al 2013 Transaction and other relevant costs as an important evaluative criterion in institutional change NIE: Cost accounting Marshall 2013 Cost of institutional change to address environmental and natural resource systems McCann 2013 Physical and institutional determinants of transaction and abatement costs, primarily in mitigating pollution Kauko 2012 Property development, planning and sustainability - application of institutional approach. Classical institutional Dupuy et al 2015 Social environmental
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