Did the Invisible Hand Need a Regulatory Glove to Develop a Green Thumb? Some Historical Perspective on Market Incentives, Win-Win Innovations and the Porter Hypothesis
Environmental and Resource Economics, Vol. 41, No. 4, pp. 519-539, December 2008
Posted: 15 Dec 2008
Date Written: December 1, 2008
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 perhaps the best way to craft 'well-designed' environmental regulations is to return to a private property rights approach to mitigating pollution problems whenever possible.
Keywords: Porter Hypothesis, By-products, Private property rights, Common law, Win-win innovation
JEL Classification: L21, O18, Q53, Q55, Q56, R11
Suggested Citation: Suggested Citation