Conference Agenda

Historical pollution incidents offer a rare opportunity to examine managerial decision-making under binding social and environmental constraints, even though the available records are often fragmentary.　 This study examines the relationship between pollution and compensation associated with two major copper mines—Besshi and Hitachi—during Japan’s early twentieth-century industrialization, with particular attention to the decision-making options available to mine operators. We reconstructed pollution levels using the atmospheric dispersion simulation model AIST-ADMER and estimated an empirical pollution–compensation relationship based on data from the Besshi mine. The estimated model was then applied to both mines to explore counterfactual outcomes. The results indicate that, despite strong profit incentives to increase production volumes even in the presence of rising compensation payments, mine operators in practice constrained their output under social and political pressure. As an additional analytical extension, we introduced a probabilistic model of technological innovation for pollution elimination. The analysis suggests that in-house development of pollution-control technologies would have been prohibitively costly, whereas the introduction of technologies from abroad represented a more feasible strategy—a pattern consistent with historical evidence. Overall, this study shows that simulation-based reconstruction can recover otherwise unobservable managerial trade-offs and illuminate how firms navigated production incentives, compensation pressures, and technological uncertainty in the governance of industrial pollution.