Can a Market Economy Produce Industrial Innovations that Lead to Environmental Sustainability

The subject of the session from which this paper takes it title has several levels of meaning, some explicit, some implied. Logically there is a prior question to that in the title, namely: are industrial innovations required if environmental sustainability is to be achieved? If ‘yes’, then the question in the title becomes relevant, and its answer is obviously, but not very interestingly, also ‘yes’. There are very many industrial innovations in market economies that reduce environmental burdens and therefore may be said to ‘lead to environmental sustainability’. This answer immediately begs further, more interesting questions, such as: Can a market economy produce enough industrial innovations to achieve environmental sustainability? If ‘yes’, will this happen more or less automatically as markets evolve in conditions of environmental deterioration, or will it need to be stimulated by government policy and intervention? If the latter, what kinds of policies and interventions are likely to be required? A decision-diagram showing these questions and their implications is shown in figure 1.