E-Letter responses to:

p-forum: Brian Walker, Scott Barrett, Stephen Polasky, Victor Galaz, Carl Folke, Gustav Engström, Frank Ackerman, Ken Arrow, Stephen Carpenter, Kanchan Chopra, Gretchen Daily, Paul Ehrlich, Terry Hughes, Nils Kautsky, Simon Levin, Karl-Göran Mäler, Jason Shogren, Jeff Vincent, Tasos Xepapadeas, and Aart de Zeeuw Looming Global-Scale Failures and Missing Institutions Science 2009; 325: 1345-1346 [Summary] [Full text] [PDF]

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Published E-Letter responses:

Missing Formal Institutions?

P K Rao   (3 November 2009)

Missing Formal Institutions? 3 November 2009
P K Rao, Development Economist Respond to this E-Letter: Re: Missing Formal Institutions?	The Policy Forum "Looming global-scale failures and missing institutions" (B. Walker et al., 11 September 2009, p. 1345) is an interesting contribution offered by several well-known experts. However, I believe that the emphasis on the role of formal organizational arrangements and of institutions, should these organizations rise to that status, is founded on assumptions that (i) negligible transaction costs accompany formation of global-scale entities; (ii) these entities function efficiently; and (iii) top-down mechanisms can correct market failures. The idea that we need additional institutions to address the many environmental crises may not be justified. It is more useful to examine the problem in terms of bottom-up approaches and agent-principal models. In the former approach, the roles of consumers and producers are better recognized and influenced. For example, differential taxation can induce less red meat consumption (which alone can offset about 50% of greenhouse gas emissions at negligible cost), and incentives can lead to the production of less carbon-intensive products, reliance on renewable energy, and technical innovations. P. K. Rao Princeton, NJ, USA.