Abstract:The idea that properly designed environmental regulations can improve a firm s competitiveness while simultaneously contributing to a cleaner environment through the development of so-called win-win innovations (i.e., that reduce environmental damage while simultaneously increasing profits) is usually credited to Porter (1991). Numerous studies have since attempted to assess the validity of the concept, with mixed results. This paper contributes to this debate by surveying a nearly forgotten body of literature written in the late nineteenth and early twentieth century that discussed the impact of market incentives on the development of valuable by-products out of industrial waste. Based on the opinions held by several industrial chemists, engineers, technical journalists and economists, the development of win-win manufacturing practices seems to have been primarily the result of the profit motive, although actual or potential legal actions based on private property rights and/or government regulations occasionally triggered this process. After reviewing some important historical writings on the latter issue, a suggestion is made that the best way to craft well-designed environmental regulations is perhaps to return to a private property rights approach to mitigating pollution problems whenever possible.JEL -codes: O31, N80, K29
Did the Invisible Hand Need a Regulatory Glove to Develop a Green Thumb? Some Historical Perspective on Market Incentives, Win-WinInnovations and the Porter Hypothesis.
Abstract:The idea that properly designed environmental regulations can improve a firm's competitiveness while simultaneously contributing to a cleaner environment through the development of so-called 'win-win' innovations (i.e., that reduce environmental damage while simultaneously increasing profits) is usually credited to Porter (1991). Numerous studies have since attempted to assess the validity of the concept, with mixed results. This paper contributes to this debate by surveying a nearly forgotten body of literature written in the late nineteenth and early twentieth century that discussed the impact of market incentives on the development of valuable by-products out of industrial waste. Based on the opinions held by several industrial chemists, engineers, technical journalists and economists, the development of 'win-win' manufacturing practices seems to have been primarily the result of the profit motive, although actual or potential legal actions based on private property rights and/or government regulations occasionally triggered this process. After reviewing some important historical writings on the latter issue, a suggestion is made that the best way to craft 'well-designed' environmental regulations is perhaps to return to a private property rights approach to mitigating pollution problems whenever possible.
