Environmental and Resource Economics

, Volume 41, Issue 4, pp 519–539 | Cite as

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

  • Pierre DesrochersEmail author


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.


Porter Hypothesis By-products Private property rights Common law Win-win innovation 

JEL Classifications

L21 O18 Q53 Q55 Q56 R11 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Anex RP (2000) Stimulating innovation in green technology. Am Behav Sci 44(2): 188–212CrossRefGoogle Scholar
  2. Anonymous (1911) Charles Louis de Saulces de Freycinet. Encyclopedia Britannica
  3. Anonymous (1953) Robert Murray Haig. Pol Sci Q 68(3):479–480Google Scholar
  4. Anonymous (2001) Allen Kneese. The Economist (March 24):129Google Scholar
  5. Asafu-Adjave J (2000) Environmental economics for non-economists. World Scientific Publishing Co., LondonGoogle Scholar
  6. Ashford N (2000) An innovation-based strategy for a sustainable environment. In: Hemmelskamp J, Rennings K, Leone F (eds) Innovation-oriented environmental regulation. Theoretical approaches and empirical analysis. Physica-Verlag, New York, pp 67–107Google Scholar
  7. Ausubel J (1998) The environment for future business. Efficiency will win. Pollut Prev Rev 8((1): 39–52CrossRefGoogle Scholar
  8. Ayres RU (2004) On the life cycle metaphor: where ecology and economics diverge. Ecol Econ 48(4): 425–438CrossRefGoogle Scholar
  9. Ayres RU, Ayres LW (2002) A handbook of industrial ecology. Edward Elgar, CheltenhamGoogle Scholar
  10. Babbage C (1835/1832) On the economy of machinery and manufacture. Charles Knight, London 〈non-paginated version available at
  11. Barnett DE (undated) Zimmermann, Erich Walter (1888–1961). Handbook of Texas online 〈
  12. Baumgärtner S, Dyckhoff H, Faber M, Proops J, Schiller J (2001) The concept of joint production and ecological economics. Ecol Econ 36(3): 365–372CrossRefGoogle Scholar
  13. Bethnal Green Branch of the South Kensington Museum (1875) Descriptive catalogue of the collection illustrating the utilization of waste products. George E. Eyre and William Spottiswoode for Her Majesty’s Stationery Office, LondonGoogle Scholar
  14. Breger M, Stewart RB, Elliott DE, Hawkins D (1991) Providing economic incentives in environmental regulation. Yale J Regul 8: 463–495Google Scholar
  15. Brenner JF (1974) Nuisance law and the industrial revolution. J Legal Stud 3(2): 403–33CrossRefGoogle Scholar
  16. Bromley DW (ed) (1996) The handbook of environmental economics. Blackwell, OxfordGoogle Scholar
  17. Brubaker E (1995) Property rights in the defence of nature. Earthscan Publications Limited, Toronto. Available at
  18. Brubaker E (1998) The common law and the environment: the Canadian experience. In: Hill PJ, Meiners RE (eds) Who owns the environment?. Rowman and Littlefield Publishers, Inc., New York, pp 87–118Google Scholar
  19. Brubaker E (2007) Greener pastures: decentralizing the regulation of agricultural pollution. University of Toronto Centre for Public Management Monograph Series, TorontoGoogle Scholar
  20. Cannan E (1901) Review of political economy by Charles S. Devas. Econ J 11(43): 379–382CrossRefGoogle Scholar
  21. Clapp BW (1994) An environmental history of Britain since the industrial revolution. Longman, LondonGoogle Scholar
  22. Chertow MR (2000) Industrial symbiosis: literature and taxonomy. Annu Rev Energy Environ 25: 313–337CrossRefGoogle Scholar
  23. Clark JM (1930) By-product. In: Johnson AS, Seligman ERA (eds) Encyclopedia of the social sciences, vol 3. MacMillan, New York, pp 129–130Google Scholar
  24. Clemen RA (1923) The American livestock and meat packing industry. Ronald Press Company, New YorkGoogle Scholar
  25. Clemen RA (1927) By-products in the packing industry. University of Chicago Press, Chicago. Available at
  26. Commons JR (1904) Labor conditions in meat packing and the recent strike. Q J Econ 19(1): 1–32CrossRefGoogle Scholar
  27. Considine TJ, Jablonowsky C, Considine DMM (2001) The environment and new technology adoption in the US steel industry. Final report to the National Science Foundation and Lucent Technologies Industrial Ecology Research Fellowship. Available at
  28. Cross FB (1999) Common law conceits: a comment on Meiners and Yandle. George Mason Law Rev 7(4): 965–982Google Scholar
  29. de Freycinet C (1870) Traité d’assainissement industriel, comprenant la description des principaux procédés employés dans les centres manufacturiers de l’Europe occidentale pour protéger la santé publique et l’agriculture contre les effets des travaux industriels. Dunod, ParisGoogle Scholar
  30. de Freycinet C (1907) Souvenirs 1848–1878. Librairie Ch. Delagrave, ParisGoogle Scholar
  31. Desrochers P (2002) Industrial ecology and the rediscovery of inter-firm recycling linkages: historical evidence and policy implications. Ind Corp Change 11(2): 1031–1057CrossRefGoogle Scholar
  32. Desrochers P (2007) How did the invisible hand handle solid waste? By-product development before the modern environmental era. Enterp Soc 8(2): 348–374CrossRefGoogle Scholar
  33. Devas CS (1901) Political economy, 2nd edn. Longmans, Green, and Co., LondonGoogle Scholar
  34. Dingle AE (1982) The monster nuisance of all: landowners, alkali manufacturers, and air pollution, 1828–64. Econ Hist Rev 35(4): 529–548Google Scholar
  35. Donnelly J (1994) Consultants, managers, testing slaves: changing roles for chemists in the British alkali industry, 1850–1920. Technol Cult 35(1): 100–28CrossRefGoogle Scholar
  36. Edmonds RH (1904) The utilization of southern wastes. Publ Am Econ Assoc, 3rd series 3(1): 162–175Google Scholar
  37. Edwards TG (2001) Tradition in a turbulent age. Whitman College 1925–1975. Whitman College, Walla Walla, WAGoogle Scholar
  38. Ethridge D (1973) The inclusion of wastes in the theory of the firm. J Polit Econ 81(6): 1430–1441CrossRefGoogle Scholar
  39. Fieldner AC (1925) Significant progress in research on fuels. Ann Am Acad Polit Social Sci 119: 13–23CrossRefGoogle Scholar
  40. Fiorino DJ (2006) The new environmental regulation. The MIT Press, Cambridge, MAGoogle Scholar
  41. Fullerton D, Stavins R (1998) How economists see the environment. Nature 395(6701): 433–434CrossRefGoogle Scholar
  42. Garwood C (2004) Green crusaders or captives of industry? The British alkali inspectorate and the ethics of environmental decision making, 1864–95. Ann Sci 61(1): 99–117CrossRefGoogle Scholar
  43. Greysmith D (2004) Simmonds, Peter Lund (1814–1897). In: Oxford dictionary of national biography. Oxford University Press 〈〉. Accessed 15 Dec 2006
  44. Haig RM (1926) Toward an understanding of the metropolis. 1. Some speculation regarding the economic basis of urban concentration. Q J Econ 40(1): 179–208CrossRefGoogle Scholar
  45. Hardie DW, Pratt JD (1966) A history of the modern British chemical industry. Pergamon Press, OxfordGoogle Scholar
  46. Heal G (2007) A celebration of environmental and resource economics. Rev Environ Econ Policy 1(1): 7–25CrossRefGoogle Scholar
  47. Hemmelskamp, J, Rennings, K, Leone, F (eds) (2000) Innovation-oriented environmental regulation. Theoretical approaches and empirical analysis. Physica-Verlag, New YorkGoogle Scholar
  48. Hobson JA (1917) The evolution of modern capitalism. A study of machine production. Charles Scribner, New YorkGoogle Scholar
  49. Jaffe AB, Newell RG, Stavins RN (2002) Environmental policy and technological change. Environ Resour Econ 22: 41–69CrossRefGoogle Scholar
  50. Jaffe AB, Newell RG, Stavins RN (2005) A tale of two market failures: technology and environmental policy. Ecol Econ 54(2–3): 164–174CrossRefGoogle Scholar
  51. Keir M (1919) The localization of industry. Scientific Monthly 8(1): 32–48Google Scholar
  52. Kershaw JBC (1928) The recovery and use of industrial and other waste. Ernest Benn Limited, LondonGoogle Scholar
  53. Kjellingbro PM, Skotte M (2005) Environmentally harmful subsidies. Linkages between subsidies, the environment and the economy. Environmental Assessment Institute, Copenhagen (DK). Available at
  54. Kneese AV (1998) Industrial Ecology and ‘Getting the Prices Right.’ Resources (Winter):10–13. Available at 〈
  55. Koller T (1918) The utilization of waste products: a treatise on the rational utilization, recovery, and treatment of waste products of all kinds, 3rd revised edition, translated from the 2nd revised German edition. D. Van Nostrand Company, New YorkGoogle Scholar
  56. Kurz HD (1986) Classical and early neoclassical economists on joint production. Metroeconomica 38(1): 1–37CrossRefGoogle Scholar
  57. Kurz HD (2006) Goods and bads: sundry observations on joint production, waste disposal, and renewable and exhaustible resources. Prog Ind Ecol 3(4): 280–301CrossRefGoogle Scholar
  58. Levinson A, Rasmussen C, Stæhr K, Wrang K (2006) Framework paper: what are the linkages between environmental policies, economic growth and employment? Green roads to growth project. Danish Environmental Assessment Institute, Copenhagen.
  59. Lipsett C (1963/1951) Industrial waste and salvage. Atlas Publishing Company, New YorkGoogle Scholar
  60. Marshall A (1932/1919) Industry and trade. The MacMillan Company, New YorkGoogle Scholar
  61. Marshall A (1950/1920) Principles of economics, 8th edn. The MacMillan Company, New York (Available at
  62. Marx K (1909/1894) Capital, volume III: the process of capitalist production as a whole (trans: Untermann E). Charles H. Kerr and Co., Chicago, 1909. 〈non paginated version available at
  63. McDonald SL (1995) Erich W. Zimmermann: the dynamics of resourceship. In: Philips RJ (ed) Economic mavericks: the Texas institutionalists. JAI Press Inc., Greenwich (CT), pp 151–183Google Scholar
  64. Meiners RE, Morriss AP (eds) (2000) The common law and the environment. Rethinking the statutory basis for modern environmental law. Rowan & Littlefield Publishers, Inc., New YorkGoogle Scholar
  65. Meiners RE, Yandle B (1999) Common law and the conceit of modern environmental policy. George Mason Law Rev 7(4): 923–963Google Scholar
  66. Mohr RD (2002) Technical change, external economies, and the Porter hypothesis. J Environ Econ Manage 43(1): 158–168CrossRefGoogle Scholar
  67. Muravchik J (2002) Heaven on Earth: The rise and fall of socialism. Encounter Books, San FranciscoGoogle Scholar
  68. OECD (Organisation for Economic Co-operation and Development) (2006) Subsidy reform and sustainable development: economic, environmental and social aspects. OECD, Paris. Partly available at,2340,en 26493742 5365 6691311137425,00.html
  69. Palmer K, Oates WE, Portney PR (1995) Tightening environmental standards: the benefit-cost or the no-cost paradigm?. J Econ Persp 9(4): 119–132Google Scholar
  70. Pearce D (2002) An intellectual history of environmental economics. Annu Rev Energy Environ 27: 57–81CrossRefGoogle Scholar
  71. Pearce DW, Turner RK (1990) Economics of natural resources and the environment. Johns Hopkins University Press, BaltimoreGoogle Scholar
  72. Playfair L (1852) On the chemical principles involved in the manufactures of the exhibition as indicating the necessity of industrial instruction. Royal Society for the Encouragement of Arts, Manufactures and Commerce, LondonGoogle Scholar
  73. Pontin B (1998) Tort law and Victorian government growth: the historiographical significance of tort in the shadow of chemical pollution and factory safety regulation. Oxf J Leg Stud 18(4): 661–680CrossRefGoogle Scholar
  74. Porter M (1991) America’s green strategy. Sci Am 264(4): 168CrossRefGoogle Scholar
  75. Porter M, van der Linde C (1995) Towards a new conception of the environment-competitiveness relationship. J Econ Persp 9: 97–118Google Scholar
  76. Press D (2007) Industry, environmental policy, and environmental outcomes. Annu Rev Environ Resour 32: 317–344CrossRefGoogle Scholar
  77. Prosser WL (1966) Private action for public nuisance. VA Law Rev 52(6): 997–1027CrossRefGoogle Scholar
  78. Richmond WH (1978) John A. Hobson: economic heretic. Am J Econ Sociol 37(3): 283–294CrossRefGoogle Scholar
  79. Roediger-Schluga T (2002) The stringency of environmental regulation and the ‘Porter hypothesis’. In: Marsiliani L, Rauscher M, Withagen C (eds) Environmental economics and the international economy. Kluwer Academic Publishers, Dordretch, pp 123–147Google Scholar
  80. Rosen CM (2003) ‘Knowing’ industrial pollution: nuisance law and the power of tradition in a time of rapid economic change, 1840–1864. Environ Hist 8(4):565–597.
  81. Rosenberg N (1994a) Energy-efficient technologies: past and future perspectives. In: Rosenberg N (eds) Exploring the black box. Technology, economics, and history. Cambridge University Press, Cambridge, pp 161–189Google Scholar
  82. Rosenberg N (1994b) Charles Babbage: pioneer economist. In: Rosenberg N (eds) Exploring the black box. Technology, economics and history. Cambridge University Press, Cambridge, pp 24–46Google Scholar
  83. Ross EA (1896) The location of industries. Q J Econ 10(2): 247–268CrossRefGoogle Scholar
  84. Russell CA (ed) (2000) Chemistry, society and environment. A new history of the British chemical industry. Royal Society of Chemistry, CambridgeGoogle Scholar
  85. Shute L (1997) John Maurice Clark. A social economics for the twenty-first century. Macmillan, LondonGoogle Scholar
  86. Simmonds PL (1862) Waste products and undeveloped substances; or, hints for enterprise in neglected fields. Robert Hardwicke, LondonGoogle Scholar
  87. Simmonds PL (1876/1873) Waste products and undeveloped substances: a synopsis of progress made in their economic utilisation during the last quarter of a century at home and abroad, 3rd edn. Hardwicke and Bogue, LondonGoogle Scholar
  88. Simmonds PL (1883) The savings of science. Pop Sci Mon 28: 798–811Google Scholar
  89. Simpson RD (ed) (1999) Productivity in natural resource industries: improvement through innovation. Resources for the Future, Washington, DCGoogle Scholar
  90. Smith VK, Walsh R (2000) Do painless environmental policies exist?. J Risk Uncertain 21(1): 73–94CrossRefGoogle Scholar
  91. Spellman WE (1979) The economics of Edward Alsworth Ross. Am J Econ Sociol 38(2): 129–140CrossRefGoogle Scholar
  92. Stavins RN (2004) The myth of the universal market. Environ Forum 21(3): 12Google Scholar
  93. Talbot FA (1920) Millions from waste. J. B. Lippincott Company, PhiladelphiaGoogle Scholar
  94. Taussig FW (1920) Principles of economics, 2nd edn revised. The MacMillan Company, New YorkGoogle Scholar
  95. Tietenberg T (1996) Environmental and natural resource economics, 4th edn. HarperCollins College Publishers, New YorkGoogle Scholar
  96. Turner RK (2000) Waste management. In: Henk F, Gabel HL (eds) Principles of environmental and resource economics. Edward Elgar Publishing Limited, Cheltenham, UK, pp 700–744Google Scholar
  97. van den Bergh JCJM, Janssen MA (2004) The interface between economics and industrial ecology: a survey. In: van den Bergh JCJM, Janssen MA (eds) (2004a) Economics of industrial ecology. Materials, structural change, and spatial scales. Cambridge: The MIT Press, pp 13–54Google Scholar
  98. Wagner M (2003) The Porter hypothesis revisited: a literature review of theoretical models and empirical tests. Centre for Sustainability Management, Lünenburg University, CSM Working Paper, DecemberGoogle Scholar
  99. Zimmermann E (1933) World resources and industries. A functional appraisal of the availability of agricultural and industrial resources. Harper & Brothers Publishers, New YorkGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2008

Authors and Affiliations

  1. 1.Department of GeographyUniversity of Toronto MississaugaMississaugaCanada

Personalised recommendations