In Search of Optimal Institutions for Sustainable Forest Management: Lessons from Developed and Developing Countries

Abstract

Despite optimism in the economics literature in the early 1970s regarding our future ability to design institutions, we have yet to progress to a state where we can contribute much towards the definition of optimal institutions for sustainable forest management in developed and/or developing countries. As we have progressed in our knowledge, the concept of specifying an “optimal institution” seems more, rather than less, elusive. Complexities with respect to defining and describing institutions and preferences of economic agents have left us with little progress on connecting institutions with economic behavior. Further complexities regarding the potential endogeneity of institutions within economic behavior have also proven difficult. All of these intricacies must be pursued in a context where the social objectives associated with sustainable forest management are variable and ambiguous. Connecting institutions to economic behavior in pursuit of social objectives may require further refinements in: our understanding and characterization of institutions; our understanding of non-institutional determinants of behavior (such as socio-economic characteristics of firms and their time and risk preferences); a wider recognition of a potential co-dependence (as opposed to cause and effect relationships) between institutions and economic behavior; more explicit recognition of transactions costs and belief systems; and clearer specifications about what we want sustainable forest management to achieve.