Critics often reproach the discipline of economics for supporting developments that result in environmental and social degradation. This article identifies where such censure is valid, but proceeds to argue that the rationale underlying economic techniques is at fault, rather than the techniques themselves. Within the rural context, we suggest that economics can make a valuable contribution to the design and achievement of sustainable ways of living. Valid criticism of economics focuses on its assumptions about value, since this has led to emphasis of favourable effects of markets, and laissez-faire. Policies exposing rural areas to more rigorously competitive market conditions encourage their transformation by increasing mechanisation, industrialisation and a less sustainable use of resources. New approaches and policies are required if different outcomes are to be achieved. An initial step is to identify desirable outcomes, a matter of social choice. However, society makes multiple demands on rural resources, and such issues cannot be adequately captured within a neo-classical welfare model. An alternative, hierarchical framework in the tradition of systems thinking, capable of analysing the complex relations associated with rural resource use, provides appropriate emphasis to the economic links between goals at different levels within the system, and appears to have some heuristic value. An empirical counterpart of the hierarchical framework, input-output analysis, generates information to support social choices and can also contribute to the understanding of economic systems and their interaction with the wider social, cultural, ethical and environmental universe. The article concludes with some revised economic policy prescriptions to promote rural sustainability. (C) 2000 Elsevier Science B.V. All rights reserved.