Cognitive and institutional perspectives of eco-efficiency

The paper sketches out a theoretical framework for analysing the interplay between eco-efficiency, cognition and institutions. It derives from analytical shortfalls of the prevailing literature, which features strongly engineering and business economics, by using insights from New Institutional Economics, from Cognitive Science and, partly, from Evolutionary Economics. It emphasises the role cognition and institutions play in the adoption of ‘green’ technologies by firms. A cognitive perspective derives from recent research on simple heuristics and context-based rationality; it is proposed that those findings can serve to analyse decision-making of individual actors respectively firms and, thus, should complement economic analysis. A second proposition is that eco-efficiency and normative rules such as a Factor Four strongly rely upon institutions, i.e. the ability of institutions to evolve over time and the development of those institutions that are most appropriate to enhance technological change. In this regard, business institutions and competition are crucial, but regulatory needs remain in order to safeguard continuity of knowledge creation. The framework allows for an analysis why overall adoption of eco-efficiency still can be considered relatively slow and why some markets and firms are far ahead. As a brief case study the article reflects upon German waste law's ability to enhance eco-efficiency.

[1]  Avinash Dixit,et al.  The Making of Economic Policy: A Transaction-Cost Politics Perspective , 1997 .

[2]  The private use of public interest , 1980 .

[3]  Koos Van Dijken,et al.  Adoption of environmental innovations : the dynamics of innovation as interplay between business competence, environmental orientation, and network involvement , 1999 .

[4]  R. V. D. Bergh.  Towards an Institutional Legal Framework for Regulatory Competition in Europe , 2000 .

[5]  K. Bizer.  Perspectives for economic research into sustainable policies , 1999 .

[6]  G. Wegner.  Economic Policy From an Evolutionary Perspective: A New Approach , 1997 .

[7]  Marco Frey,et al.  Adoption of Environmental Innovations , 1999 .

[8]  Peter Söderbaum,et al.  Values, ideology and politics in ecological economics , 1999 .

[9]  A. Jaffe,et al.  Environmental Policy and Technological Change , 2002 .

[10]  W. Walker.  Entrapment in large technology systems: institutional commitment and power relations , 2000 .

[11]  Nicole J. Saam,et al.  Competition as a Test of Hypotheses: Simulation of Knowledge-generating Market Processes , 2001, J. Artif. Soc. Soc. Simul..

[12]  E. Ostrom.  A Behavioral Approach to the Rational Choice Theory of Collective Action: Presidential Address, American Political Science Association, 1997 , 1998, American Political Science Review.

[13]  Adam Rose,et al.  Frontiers of Environmental Economics , 2001 .

[14]  Dominique Foray,et al.  The dynamic implications of increasing returns: Technological change and path dependent inefficiency , 1997 .

[15]  Emiel F. M. Wubben.  The dynamics of the eco-efficient economy : environmental regulation and competitive advantage , 2000 .

[16]  R. Nelson.  Recent Evolutionary Theorizing about Economic Change , 2005, Technology, Institutions, and Economic Growth.

[17]  Bernard Sinclair‐Desgagné,et al.  The firm, its procedures and win-win environmental regulations , 2001 .

[18]  L H Lovins,et al.  A road map for natural capitalism. , 1999, Harvard business review.

[19]  Michael E. Porter,et al.  Green and Competitive : Ending the Stalemate , 1996 .

[20]  Joanne Vining,et al.  How Similar are Recycling and Waste Reduction? , 2001 .

[21]  D. Teece,et al.  The Dynamic Capabilities of Firms: an Introduction , 1994 .

[22]  Christa Liedtke,et al.  Die COMPASS-Methodik: COMPAnies and sectors path to sustainability. Unternehmen und Branchen auf dem Weg zur Zukunftsfähigkeit. Zukunftsfähiges Unternehmen (5) , 1999 .

[23]  A. Ortmann,et al.  Reasoning in economics and psychology : Why social context matters , 2000 .

[24]  J. Trachtman.  Regulatory competition and regulatory jurisdiction , 2000 .

[25]  Richard N. Langlois,et al.  Firms, Markets and Economic Change: A dynamic Theory of Business Institutions , 1995 .

[26]  Ove Granstrand,et al.  Towards a theory of the technology-based firm 1 Paper originally presented at the workshop on `Techn , 1998 .

[27]  B. Loasby.  special issue: Cognition, imagination and institutions in demand creation , 2001 .

[28]  R. Norgaard.  Development betrayed: the end of progress and a coevolutionary revisioning of the future. , 1994 .

[29]  L. Lovins,et al.  Factor Four – Doubling Wealth, Halving Resource Use , 1997, Energy Exploration & Exploitation.

[30]  B. Loasby.  Cognition, imagination and institutions in demand creation , 2001 .

[31]  J. March.  The Pursuit of Organizational Intelligence , 1999 .

[32]  Henk Folmer,et al.  The International Yearbook of Environmental Resource Economics 2001/2002 , 2001 .

[33]  P. David.  Why are institutions the ‘carriers of history’?: Path dependence and the evolution of conventions, organizations and institutions , 1994 .

[34]  Douglass C. North,et al.  Five Propositions about Institutional Change , 1993 .

[35]  H. Siegenthaler.  Learning and its Rationality in a Context of Fundamental Uncertainty , 2000 .

[36]  M. Rabin.  Psychology and Economics , 1997 .

[37]  A. Jaffe,et al.  Technological Change and the Environment , 2000 .

[38]  Janne Hukkinen,et al.  Eco-efficiency as abandonment of nature , 2001 .

[39]  Gerd Gigerenzer,et al.  Visions of rationality , 1998, Trends in Cognitive Sciences.

[40]  R. Kemp.  Environmental policy and technical change , 1997 .

[41]  Itai Sened,et al.  Explaining social institutions , 1996 .

[42]  Nathan Rosenberg,et al.  Exploring the black box: Telecommunications: complex, uncertain, and path dependent , 1994 .

[43]  D Kahneman,et al.  On the reality of cognitive illusions. , 1996, Psychological review.

[44]  E. Schlicht.  On custom in the economy , 1998 .

[45]  D. North,et al.  Elements of Reason: Shared Mental Models: Ideologies and Institutions , 1994 .

[46]  J. Stiglitz.  Distinguished Lecture on Economics in Government: The Private Uses of Public Interests: Incentives and Institutions , 1998 .

[47]  Ursula Triebswetter,et al.  Environmental Regulation and Competitive Advantage , 2000 .

[48]  P. David.  Clio and the Economics of QWERTY , 1985 .

[49]  D. North.  Institutions, Institutional Change and Economic Performance: Economic performance , 1990 .

[50]  R. Grant.  Toward a Knowledge-Based Theory of the Firm,” Strategic Management Journal (17), pp. , 1996 .

[51]  D. North.  Competing Technologies , Increasing Returns , and Lock-In by Historical Events , 1994 .

[52]  H. Simon,et al.  Rationality as Process and as Product of Thought , 1978 .

[53]  J. Metcalfe,et al.  Institutions and Progress , 2001 .

[54]  P. Todd,et al.  Simple Heuristics That Make Us Smart , 1999 .

[55]  S. Hart.  A Natural-Resource-Based View of the Firm , 1995 .

[56]  P. Mosley.  The Making Of Economic Policy , 1984 .

[57]  Frans Berkhout,et al.  Technological regimes, path dependency and the environment , 2002 .

[58]  Emiel F.M. Wubben.  The Dynamics of the Eco-Efficient Economy , 2000 .

[59]  D. Leonard-Barton,et al.  Wellsprings of Knowledge: Building and Sustaining the Sources of Innovation , 1995 .

[60]  Richard R. Nelson.  The problem of market bias in modern capitalist economies , 2002 .

[61]  W. Arthur,et al.  INCREASING RETURNS AND LOCK-IN BY HISTORICAL EVENTS , 1989 .