SUMMARY Environmental disruption and social costs have long been neglected or kept at the periphery of conventional economic theory. This is not surprising. They are largely extra market phenomena and traditional economic theory is ill equipped to deal with phenomena which are the result of interdependencies and effects of which markets and prices take no or only partial account. The challenge to economics is due to the complexity of the causal chain which gives rise to environmental disruption and the magnitude of the social costs. These defy any treatment in terms of such traditional concepts as ‘externalities’, GNP, etc.—and, moreover, put in question the validity of our traditional measures of efficiency and optimalization by economic units or subsystems of the economy. The answer to this challenge will have to be found not by means of formal welfare criteria but in terms of concepts defining a substantive rationality reflecting actual human needs and requirements of human life. While conventional economic theory has so far refused to accept this challenge its status and relevance as a discipline in the future will depend upon its willingness and ability to develop new modes of thinking more appropriate for the problems caused by environmental disruption and social costs.

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Kapp 's biographical background 1The history of the manuscript and Kapp's intellectual project 2 A final note on changes to the manuscript 10 Notes 11 1 Introduction: the lasting and increasing relevance of institutional economics 14 2 Institutional economics and conventional economic theory 17 Introduction 17 The fallacies of the utilitarian foundations: the teleological bias 21 Logical fallacies of the "consumer sovereignty " doctrine 23 The fallacies of the means-ends dichotomy 27 Conclusion 28 Notes 30 3 Intellectual antecedents of institutional economics 33 Introduction 33 The classical foundations of institutional economics 34 The influence of John Stuart Mill 38 The Marxist elements 41 Max Weber 44 Conclusion 46 Notes 47 viii Contents 4 The nature and meaning of institutions: towards a theory of institutional change 49 Introduction 49 The meaning of institutions 49 The origin and function of institutional behavior 50 Towards a theory of institutional change 55 Notes 63 5 The institutional theory of human conduct and economic behavior • . _ • 65

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