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How neoclassical economics can pave the way for a circular economy

IbyIMD+ Published 8 September 2021 in Sustainability • 9 min read

Incentivizing better business and consumer behavior via tax and market-based instruments will preserve the planet, say Johannes Buggle and Jean-Pierre Danthine. Here’s how companies can transform. 

Until relatively recently, the capacity of the Earth and the atmosphere to regenerate did not make our linear economic system particularly problematic. The linear economy extracts natural resources, produces energy and goods that are disposed of after use as pollution or waste. This “take, make, waste” model has undoubtedly generated prosperity in many parts of the world, but has come with a tremendous cost for the planet.  

Until the middle of the 20th century, the negative collateral of economic activities could be absorbed by the environment. However, with the explosion of the world’s population and the growth of material well-being in the world, the perspective has radically changed and these negative collaterals have become catastrophic externalities. According to a…

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