Institutions exert a major influence on market and non-market behaviour. How do they evolve in relation to the economy? How do population growth, market forces, environmental endowments and technological factors determine institutional patterns? This survey by Copenhagen University criticises the tendency to draw policy conclusions from simplistic analysis, and argues a need for more credible empirical research.
Developing countries depend in a number of important ways on their natural capital. Peasants, fishermen and cattle herders earn their living directly from utilisation of renewable natural resources such as farm land, water, air, forest, grazing areas, irrigation, plants and animals. In many countries these resources are increasingly exposed to unsustainable exploitation, pollution and conversion to other uses. When natural resources degrade or perish, peoples’ livelihood disappear, aggravating problems of rural poverty, food insecurity and rural-urban migration. Scholars often distinguish among four main underlying factors causing environmental destruction: market failures (externalities), government failures (environmentally adverse policies), population growth and property rights failures.
As far as property rights failures are concerned, considerable scope exists for improving upon and developing empirical institutional analysis, including measurement of concepts such as transaction costs, institutional change and social capital.
- Data needs, survey design and analytical methods for institutional analysis often differ from analysis of household behaviour.
- For example, analysis of local common property resource management institutions necessitate data at the village level, rather than the usual household surveys.
- A large number of village studies have been carried out, but often suffer from problems of sample size and selectivity.
- In studies of individual villages, it is sometimes unclear whether this particular village was selected randomly, or whether it was chosen to represent a specific case.
- There is a need to map data on institutions and socio-economic outcomes to environmental data (often obtained from satellites or aerial photo), preferably using both cross-section and time-series data.
- Various researchers have argued that social systems are highly path-dependent such that institutions and social capital created centuries ago exert a strong influence even today.
- More research on this hypothesis is needed but if true it would certainly affect the way we think about development policy advice not least with regard to the prospects for successful manipulation of institutional dynamics.
Several general conclusions can be drawn from the survey, including the following:
- Common property systems deserve respect for their management, equity and insurance functions.
- Policymakers should refrain from undermining common property systems, and should instead seek to support them.
- Few general conclusions regarding the effectiveness of local institutions in responding to environmental pressure can be safely made.
- Future research is likely to strive to gain a better understanding of the evolution of resource management and other rural institutions and the ways in which policy can affect outcomes.
- Continued dialogue between anthropologists and field workers, who possess detailed knowledge about the array of existing institutions, and economists, who may help achieve insight into the functioning and efficiency of such institutions, would be fruitful.
- Research in the institutions of developing countries is not merely of theoretical interest but can, in important ways, help improve policy analysis and advice, especially when rooted in solid empirical work.
