Journal of Institutional Economics (2014) doi: http://dx.doi.org/10.1017/S1744137413000428

Payments for ecosystem services (PES) have become a popular approach to bring about improved environmental behaviors. When such programs are launched in developing countries, an additional benefit is that they are said to improve incomes for the poor. In this paper, we argue that PES schemes are not ‘market-based’. Indeed, they are not even ‘market-like’. The incentive properties said to be present in such programs are of doubtful efficacy. We suggest that PES schemes are instances of a new class of transaction – the inducing transaction – whose purpose is to make certain resource users the instruments of the desires of others. We relate the success of PES schemes to Veblenian ‘habituation’ and Peircean ‘habit breaking and habit taking’ to suggest that PES schemes face a daunting challenge if they are to bring about durable behavioral changes.