Squandered profit opportunities? Some historical perspective on industrial waste and the Porter Hypothesis

Despite numerous studies, the 'Porter Hypothesis' (PH), which states well-designed regulations can compel manufacturers to develop innovations with both economic and environmental benefits, remains unsettled. We examine two significant cases for which PH claims were once made: the British alkali industry and the (Tennessee) Copper Basin smelting operations. Our conclusions are: (1) the PH is based on a flawed understanding of how 'win win' innovations spontaneously emerge in competitive settings, (2) regulatory pressures were only one (and typically minor) factor, and (3) “strict and well designed” environmental regulations are unlikely to deliver superior outcomes to traditional property rights-based approaches.