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Abstract:
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"Much of the analysis being conducted in natural resource economics and policy is statistical, technical, and formal. Shadow prices for nonmarketed resources, linear programming models of optimal timber harvest scheduling, and the application of optimal control theory to groundwater management all provide examples of the ingenious application of these techniques. The level of sophistication in this research is impressive, but the implications are often enigmatic and sometimes irrelevant.
"The new resource economics (also referred to as the new institutional economics), with its focus on institutions and their effects on individual decision makers, is a more encouraging and quite possibly a more relevant approach to natural resource policy. This new economics takes decision-makers as the relevant units of analysis and then focuses on the information and incentives provided by the institutions within which they operate. The propositions underlying this approach are, first, that individuals act on information and incentives and, second, that institutions generate information and structure incentives. By focusing on the institutional structuring of information and incentives, it is possible to explain important aspects of pollution, the rapid depletion of resources, the extinction of animal and plant species, and inefficient resource use."
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