industry-government incentive regulatory regime. Regardless of the dubious political viability of this option, it certainly implies a high degree of internalization of social costs by the responsible firm. Whether those urging this approach understand that they are implicitly arguing for a fundamental redefinition of the private firm is unclear.

  • The disconnect between the scope and scale of private firms and their environmental impacts.

Virtually all modern approaches to environmental issues begin with the assumption that the appropriate scale of analysis is the life cycle of the material, product, or service at issue. A life cycle approach is clearly necessary and desirable if the inefficiencies and suboptimal results of localized optimization at the expense of the overall performance of the system are to be avoided. One example occurred with "air stripping" of volatile organics, which cleaned the water but generated air pollution. Such solutions usually resulted from decisions targeting single medium problems with little if any thought given to resultant systematic impacts.

However, there is an obvious disparity between the scope and scale of even the largest firms and the life cycles of their materials, technologies, products, and processes. Firms manufacturing complex articles do not usually extract or perform initial processing on the materials they use. That is done by petroleum, mining, or chemical companies. Manufacturing firms also do not usually manage the products after the consumer is through with them, nor do they manage the material streams that may result from the dismantling or recycling of postconsumer products. Conversely, firms providing raw materials for the economy seldom have a detailed idea of how their industrial customers are using, formulating, or disposing of excess material. This structure has arisen for economic and historical reasons, with each firm seeking a position in a relatively limited number of markets where its core competencies give it a competitive advantage. The structure is also the result of legal actions. In virtually all market economies, some form of antitrust regulation controls both the scale (size within markets) and scope (vertical combinations) of private firms, although the mechanisms and stringency of regulations vary considerably depending on the country. Moreover, in many cultures, especially that of the United States, large organizations are generally disfavored.

Environmental policies are in the short-term moving toward take-back policies for packaging and products. Under these policies, the manufacturer is responsible for taking back its packaging and products after the consumer is through with them and refurbishing, recycling, or properly disposing of them. Especially in Europe, policy discussions are beginning to suggest that manufacturers implement programs to extend product life. Under these programs, product are refurbished and returned to commerce as step toward the "functionality economy,"

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