Ecology and economy are increasingly intertwined in the local, regional, national and global level. The paper explains an institutional essence of the conflict that has long existed between the economy and ecology in the context of the need for much better protection of the environment. In the economic literature it is interpreted as a fundamental contradiction of economic reality. In order to meet the Pareto optimum in resolving conflict between economy and ecology, it is necessary to verify two hypotheses in practice: First, institutional arrangements should be urgently and consistently implemented, and second, the current formula of economic development should be expanded with another member - sustainable development, which also, consequently and necessary, should be based on institutional grounds
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