BUSINESS PERSPECTIVES
By DAVID M. KIEFER, Senior Editor
The changing ground rules of business economics Most corporate executives now recognize that they will be devoting much more time and effort and spending many more dollars during the decade ahead to control pollution. They may not completely like the prospect, to be sure, and many are still facing it reluctantly. Some may try to evade and stall. But it is not just the farsighted anymore who acknowledge that dragging their feet, in the face of rising pressures, will merely postpone the inevitable—and not for long at that. Soon, in fact, corporations may be trying to outdo one another in pushing pollution abatement efforts. The amount they spend on control, even though it may represent dollars and cents skimmed right off pretax profits, may then take on much the same aura of glamour that spending for research and development has now—or, at least, had until recently. Before they get too involved in a numbers game of who spends most, however, company officials—as well as government people and the public at large—should realize that growing investments to fight pollution will bring far-reaching changes in the economics of business that may only be masked by mere recital of monetary outlays. For one thing, as substantial costs for pollution control are built into operating and capital budgets, an important new parameter is added to the competitive equation. Such costs will certainly have a direct impact on the future location of industrial activity within the United States itself and on the commercial success of one product versus another. And as marketing becomes increasingly internationalized, the impact may be even greater on the competitive stance of U.S. industry as a whole compared to that of other nations where pollution is less of a social issue and local regulations are less stringent. In fact, the growing hue and cry for pollution abatement is but one example of the way in which the traditional rules of business economics are changing as political and social pressures impinge more and more on business enterprise. The classical concept that an economy's resources are allocated most efficiently through the free interplay in the market place of supply and demand, prices and utility may prove less meaningful in the future. The time-honored theory that a market economy works best when buyers and sellers are permitted to act unhampered in their own interests through countless individual transactions will seem less in touch with reality. These changes in the accepted market mechanisms mean that businessmen must develop new yardsticks on which to base their decisions. Techniques of market evaluation and risk analysis will be outmoded unless they are modified to take into account social and political as well as the usual economic factors. The market for a new pesticide will be determined, for example, not only by its utility and cost in relation to competing products but by its effect, however hard to assess, on the overall environment. Sales of a new packaging material cannot be estimated just from its price and usefulness compared to other available materials; the problems of getting rid of it after it has served its purpose must also enter the equation. Unfortunately, the social and political inputs to the marketing equation are likely to be much more difficult to identify, quantify, and work with than the economic inputs. Businessmen attempting to weigh the rapid changes that have influenced their operations during the past couple of decades have thought largely in terms of technological developments: nuclear energy, solid-state electronics, data processing, and the like. It may well be, however, that the most important changes in the next decade, at least as far as business is concerned, will be generated by the interaction of social factors on economic decisions. Business analysts and policy makers thus may have to rethink many of the classic assumptions by which they customarily have set their course.
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Ashland Chemical Company DIVISION OF ASHLAND OIL & REFINING COMPANY
JAN. 26, 1970 C&EN 25
