ABSTRACT
In order to prove my propositions, I will start by giving an overview of the ideas governing the neoclassical approach to environmental problems. For readers unfamiliar with environmental economics, I will put special emphasis on the
instruments discussed in this branch of economic theory and also sum up the points in favour of and against each of these instruments. This discussion will constitute the basis for the later analysis. As a next step I will introduce some of the results from my field studies undertaken in Japan during 1999 and 2000. Because this material is mostly based on interviews with environmental experts, it has not been previously available in written form in English. Water pollution control in Japan will be taken as a case study in this paper, because it offers a good example to illustrate the points that need to be made. This case study will first be analysed in the light of orthodox environmental theory which will show that social institutions play a crucial role in explaining the efficiency of environmental policy in Japan. It is the use of these informal institutions that enables Japanese officials to alter cost-benefit expectations concerning environmental protection activities for Japanese industry. It will be concluded that the outcome of administrative guidance cannot be explained on any other basis than the existence and usage of social institutions. It is this that leads to the above-mentioned assumptions concerning the direction of institutional change in the field of environmental protection in Japan. On this basis it becomes possible to assess the impact of institutional change on the future prospects of environmental policy in Japan, which I will do in the last part of this chapter.
