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allowed. They are quite vulnerable to lobbying about it. It’s hard to monitor the outcome. They’re unlikely to take firm action if there are pollution spills. In short, the existence of an externality makes it difficult for either government or market to get to the ideal outcome. This is why so many other types of institution emerge to address situations where there are externalities, or shortages of information. Effective institutions manage to align everyone’s interests in the same way. Traffic lights are a good example: it’s in almost everyone’s interest to obey a red light most of the time, otherwise they’ll likely be involved in an accident, so they are largely self-policing.8

This takes us on to the third building block, the need to adapt institutions in general to the structure of the economy as it is emerging in the ICT age, and particularly the institutions of government and the processes by which collective decisions are made. Government is the name we give to the framework that enables us to live in large, complicated societies. Governance is the word social scientists use to include in addition other institutions around the periphery of politics and the official bureaucracy. In no country have the institutions of governance kept pace with the speed and ease with which information can now be accessed.

Nowhere are there processes for implementing policies that command real legitimacy any longer, and this makes it next to impossible to envision the achievement of something like a consensus for taking difficult decisions. Instead, some Western democracies have a bitter, partisan politics, which doesn’t seem to stem from large differences in practical policies, whatever the apparent ideological or philosophical differences between politicians. The rhetoric of parties might differ greatly, but the differences between specific measures typically are matters of nuance. The United States is probably the clearest example, so great are the cultural and philosophical differences between core Republican and core Democrat supporters. Elsewhere, there are bitter yet meaningless debates over questions of the managerial competence of different parties, with little or no difference between them in terms of their political philosophies or ideologies. So alongside the institutional challenge there is a political challenge too, the need to find an appropriate political debate about shared priorities and beliefs.

In time, the technological tools could transform the way politicians engage with voters. There’s certainly plenty of experimentation under way. Finding appropriate institutional structures—using the new technologies—will be important if decisions about today’s choices and activities are to give proper weight to the needs of the future. The right structures will take decisions out of the hands of centralized hierarchies. They will involve a more productive and thoughtful interplay between markets and governments than we’ve typically had in the past, one taking account of the dramatic technological and structural change in the economy. Markets and governments need each other to function well, and indeed often “fail” in the same contexts. The existence of transactions costs and information asymmetries present a challenge to any institutional framework. The work of the 2009 Nobel laureates Elinor Ostrom and Oliver Williamson focuses precisely on the way these aspects of reality shape different kinds of institutional response. The utterly transformed world of information, due to ICTs, is revolutionizing the governance of every economy, and we’re only partway through the revolution.

THE STRUCTURE OF THIS BOOK

This book is divided into three parts. The first sets out the interrelated challenges forming the Economics of Enough, and the common theme of the need for economic decisions and policies to address a much longer time frame. The first chapter addresses the myths and realities of happiness, to make the scale of the challenge clear, and it demonstrates that there is no “easy” option of simply reeducating people in