ABSTRACT
Israel is incapable of planning for sustainable development i.e., deciding on the necessary actions and undertaking their implementation. Institutional analysis is applied to account for the failure and to suggest how to transform the current system and eliminate the critical constraints to more effective planning and action. Based on institutional economics and transaction cost theory, institutional analysis looks at planning, institutions and organizations as forms of governance. The analysis distinguishes between the market and its protagonists: developers and the consumers of their products, and the actors involved in governance and constituting the market's institutional environment. The traditional economic efficiency criterion for evaluating public investments is applied in old-fashioned benefit-cost analysis, called in Ministry of Finance (MOF)-speak 'specification procedure'. But even the MOF has proved incapable of implementing badly needed reforms in local government, and most decisions at various levels are deservedly dependent on central government agencies' resources and approval.
