ANALYSIS Institutional ecological economics Jouni Paavola a, * , W. Neil Adger a,b a Centre for Social and Economic Research on the Global Environment (CSERGE), University of East Anglia, Norwich NR4 7TJ, United Kingdom b Tyndall Centre for Climate Change Research, University of East Anglia, Norwich NR4 7TJ, United Kingdom Received 20 August 2003; received in revised form 9 July 2004; accepted 24 September 2004 Available online 3 February 2005 Abstract New institutional economics and its forerunners have, we argue made important contributions to the evolving agenda of ecological economics. The conceptualisation of environmental problems as instances of interdependence and the acknowl- edgement of positive transaction costs are key insights into the nature of environmental problems. We also discuss how plurality of behavioural motivations and limited cognitive capacity have important implications for environmental decision making and its analysis. We show how evolutionary and collective action theories offer complementary takes on the choice and change of environmental governance institutions and how the concept of social capital can enrich analyses of environmental governance. We conclude that an emerging institutional ecological economics has the greatest relative advantage in analysing the design, implementation and effectiveness of environmental governance solutions. D 2004 Elsevier B.V. All rights reserved. Keywords: Environmental governance; Institutions; Interdependence; Transaction costs JEL classification: Q20; D78; B52; Z13 1. Introduction One of the major challenges of ecological eco- nomics has been how to understand and examine the design of environmental policies and governance institutions. Institutional economics in all its guises has been an influential source of ideas for ecological economics. Ecological economics has turned to institutional economics for sophisticated models and understanding of human behaviour (Dodds, 1997; So ¨derbaum, 2000) and for explaining the role of institutions in collective action and environmental outcomes (Adger, 1999; Hodge and McNally, 2000; Randhir and Lee, 1996; Spash and Villena, 1999). Institutional economics has also been a source of alternative views regarding policy analysis and the 0921-8009/$ - see front matter D 2004 Elsevier B.V. All rights reserved. doi:10.1016/j.ecolecon.2004.09.017 * Corresponding author. Tel.: +44 1603 593 116; fax: +44 1603 593 739. E-mail addresses: j.paavola@uea.ac.uk (J. Paavola)8 n.adger@uea.ac.uk (W.N. Adger). Ecological Economics 53 (2005) 353 – 368 www.elsevier.com/locate/ecolecon