ABSTRACT
During the 1960s and 1970s, environmental pollution rose to intolerable levels in most industrialized countries. Pollution was broadly seen as a failure of the market, or of the ‘Invisible Hand’ (an expression coined by Adam Smith, the arch-father of the market economy, to describe the action of the market acting without government intervention). This view led environmental activists to call for laws and other action by the ‘Visible Hand’ of the state. It was this ‘critical of the markets’ mindset that led to a large body of environmental legislation, essentially in all OECD countries. As it turned out, pollution control legislation and enforcement from that era became a spectacular success story. After 20 to 30 years, many of these initial environmental problems had largely disappeared. The air in Pittsburgh, in Osaka, in the Ruhr district got cleaner, and the same happened with the water of the Ohio, Thames and Rhine rivers and of lakes suffering from eutrophication and pollution not long ago.
