Introduction

This chapter begins by introducing the reader to the basic economic approach to the environment, which emphasizes scarcity, tradeoffs, valuation, and incentives. The discussion then introduces the idea of institutions as societal rules that govern people’s behavior. It then develops the notion of transaction costs as an important concept in influencing people’s ability to transact and cooperate with each other. As one of the key sources of institutions is legislatures of elected representatives, the discussion then describes the public choice approach, which is the application of economic tools to study politics in order to understand the causes and consequences of government policy. The chapter concludes with a roadmap to the book, describing the progression and organization of topics. The book starts with two chapters devoted to basic economic tools and concepts, followed by three chapters that discuss several topics central to the institutional economics approach. The remainder of the book is organized into eleven topic chapters that apply the institutional approach to gain insights into a variety of environmental issues.