In their bestseller Natural Capitalism, a book so heartily praised by environmentalists and business executives that its American edition sold out before its publication date, authors Paul Hawken, Amory Lovins, and L. Hunter Lovins indict traditional capitalism as a "financially profitable" but "nonsustainable aberration in human development" that is rapidly depleting our unrecoverable natural capital.1 To escape this predicament, the authors recommend, among other things, massive taxation and complex regulation of everything they dislike, from nonrenewably generated electricity and fossil fuels to chlorine and pesticides.
Despite being described in their book dust-jacket blurbs as "three of the world's best brains," Hawken and the Lovinses fail to notice that some of their evidence actually warns against their politically driven prescription. For example, they identify a number of American policy failures that have resulted from over "two hundred years of policies in taxes, labor, industry, and trade meant to encourage extraction, depletion and disposal." As they point out: "Hundreds of billions of dollars of taxpayers' money are annually diverted to promote inefficient and unproductive material and energy use." These range from "perverse subsidies" to the primary sector in mining, oil, coal, fishing, forest industries, and agriculture that degrade soil fertility, use wasteful amounts of water and chemicals, and discourage the use of recycled material. Meanwhile, modern American agriculture features various input subsidies, price supports, production quotas, and use-it-or-lose-it western water laws that result in a Soviet-style system which rewards participants for how much they manufacture or consume rather than how efficiently they produce.
So could it be that our modern economies would have been more "sustainable" if politicians had not been busy distorting markets for several decades? Much evidence suggests that this might indeed have been the case.
The authors suggest that reducing the wasteful throughput of materials can be accomplished by "redesigning industrial systems on biological lines that change the nature of industrial processes and materials, enabling the constant reuse of materials in continuous closed cycles." In other words, one company would feed on the waste of another.
Much historical evidence, however, suggests that market economies were behaving that way long before Hawken and the Lovinses were born. Actually, many books and monographs were written on loop-closing several decades ago.2 In virtually all instances, people familiar with the inner workings of factories saw the creation of wealth out of industrial waste, whether within the confines of a firm or through trade in the market, as an important way of gaining a competitive advantage.
For example, the American authors of the Illustrative and Descriptive Catalog of Whitin Cotton Waste Machinery and of Various Systems of Working Cotton Waste marketed their machines by making this argument in 1914: "The economical and profitable disposal of the waste products of a cotton manufacturing plant has become a problem of the greatest importance. . . . The reclamation of the waste products of a mill affords simple means for the manufacturer to reduce his manufacturing expense to a minimum."3
The German engineer Ernest Hubbard similarly wrote in the preface of his book The Utilisation of Wood-Waste, first published in 1902: "The rational utilisation of waste products is at all times important, but as our industries become more and more developed the working up of the waste or bye-products [sic] which may be produced in any process becomes absolutely essential from an economical standpoint."4 Looking to the recent past, the journalist Frederick Ambrose Talbot wrote in 1920: "To relate all the fortunes which have been amassed from the commercialization of what was once rejected and valueless would require a …