Living in the Age of Market Economics: An Analysis of Formal and Informal Institutions and Global Climate Change

Institutions have long shaped human life. One of their key roles is to balance the interests of the community with those of smaller sub-groups and individuals. The larger and more complex human communities are, the more pressing the need for functioning institutions. Climate change is an unprecedented threat to the balance between the interests of the community and those of sub-groups and individuals. Yet, formal institutions have failed to address the climate crisis, and while there have been numerous efforts to negotiate global climate solutions, effective enforcement mechanisms are lacking. In contrast, economic institutions have expanded their global reach, especially after the dissolution of the Soviet Union. This paper argues that the absence of effective institutions to mitigate climate change warrants a closer look at standard market economics since economic transactions have an outsized impact on climate change. Moreover, standard market economics has not only succeeded in implementing formal economic agreements but also propagated its informal institutional mindsets. Four underlying principles of the market economic mindset, namely its understanding of time, place, context, and growth, are analyzed to illustrate how standard market economics impacts the global climate crisis. The analysis shows that by making these underlying principles transparent, pathways for local and regional climate solutions can be advanced even in the absence of effective formal institutions that enforce climate mitigation at the global level.