Institutional change in the forest sector: trust and mental models

Abstract

The paper looks, from a perspective of institutional economics, at a process of change of rules and organisational practises in the forestry sector, particularly drawing on a case study of small-scale private forest owners in the Allgau, Bavaria. It is argued that the process of change may be initiated by the traditional factors mentioned by the various theories of institutional change (technological change, changes in preferences, changes in relative factor prices, etc.). However, the direction of change observed in the short run cannot be understood with the help of efficiency theories of institutional change. Denzau and North (1994) extended those theories by introducing mental models as explanatory variables. Mental models are the interpretations (half-baked theories) people use to understand their environment. As observed, mental models play a crucial role in determining the direction of change. However, the question that arose was: what determines the selection of mental models in an uncertain environment? It is observed that trust plays an important role. Therefore, an extension of the Douglas and North theory is suggested.