Journal File May 6, 1999 AAS

Agendas, Profit Maximization, Technological Change & Pollution Reduction

We are observing that firms are finding new products and technologies to transform waste products into salable profit making products. This raises the question of why were not these firms already utilizing any profitable opportunities available. The answer lies in bounded rationality. There is no way that managers can consider all profit making possibilities. The kinds of things that get considered are influenced by business custom, firm culture, general culture and news, and legal changes or threat thereof. Citizen movements and political response can put the search for pollution related innovation on the agenda of managers. Once bounded rationality is acknowledged it can be seen that institutional change can change behavior even if it does not have any direct sanctions involved. Institutions affect which among the large number of profitable possibilities come to manager's attention. Proving once again, that talk is not cheap.