Abstract
Compared with the traditional development model, sustainable development embodies more public and long-term tendency in its goal and content. This means government ability will face more challenges. “Kaldor-Hicks Improvement” principle supplies a frame for government implementing sustainable development and going to “Pareto Improvement”, and decides that the core of government ability is institution supply ability. In order to fully exert government ability, institution arrangement should obey four basic principles of market priority, local government priority, public participation and legalization.
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