From Market to Transition Economics: The Institutional Road to Ecological Economics

Drawing upon the Institutionalist tradition, this article seeks to offer a few principles for a possible transition of capitalist market economies to sustainable ecological economies. The world-wide economic liberalization of the 1980s resulted in loosely regulated market-led and financialized economies. Public and private actors' strategies became closely relying on short-sighted return-on-investment criterion, increasing the role of financial institutions and financial efficiency criteria in the functioning of economies. Therefore, economic, political and social decisions were related to financial efficiency criterion that was supported by the financial market efficiency hypothesis and then, by the public intervention inefficiency hypothesis. Through radical institutional changes, public regulation and collective action mechanisms were reduced to their (im)possible minimum level and governance of the economy was left to self-regulation rules. This private-interest-led regime relied on de-institutionalization of governance structures (regulation, supervision and incentivization of markets) and led to the 2007-08 financial crisis. The overall evolution of societies then took an unsustainable path regarding the environmental, ecological and social issues. Environmental and resources depletion and hysteresis of inequalities are some of the consequences of this episode. So, in the face of growing instabilities and insustainabilities, the necessary transition of the market economy to a viable society calls for an institutional revolution that would offer an alternative organization of economic and social dynamics in favor of collective action, apt to make private actors behavior consistent with societal coherence.