Art Carden  

Cato Unbound on Recycling: A Landfill is an Inventory

Quotable... Krugman's Faulty Analogy...

The June issue of Cato Unbound features a lead essay on recycling by Mike Munger and, so far, response essays from Edward Humes, Melissa Walsh Innes, and Steven Landsburg. As of right now, there are also "conversation" essays from Mike Munger and Melissa Walsh Innes.

In their opening essays, Humes and Innes reiterate the claim that recycling makes economic sense because we are discarding so much "valuable" material in landfills. I put "valuable" in quotes intentionally: as Munger notes, in this context, something is only a resource (and only "valuable") if people will pay you for it. Paraphrasing Munger, people would be hustling to pay you for your bottles and cans if they were valuable resources. The fact that they aren't suggests that these aren't resources. They're garbage.

Here's where prices (and profit and loss signals) are useful. If the resource savings from recycling were as substantial as people claim, we should expect to see greedy entrepreneurs and businesses hustling to enjoy these savings by bidding up the prices of recycled materials. It might be true that we save substantial energy by producing from recycled aluminum. Why, then, don't firms take advantage of these cost savings? I'm pretty sure it's because these savings are more than offset by other costs.

Humes and Innes question the wisdom of discarding materials, but there's another way to think about it: holding materials in a landfill is just another way of keeping them in inventory. As Munger details, recycling is costly--usually more costly than producing from virgin materials. If we exhaust our supplies of virgin materials, rising prices will encourage people to develop substitutes. One substitute for mined virgin materials would be...mined materials in landfills. At first glance, this looks wasteful, but again, prices allow us to figure out whether it is more efficient to recycle an aluminum can or save it for later. Munger makes this point explicitly with respect to plastic in his first follow-up essay:

We recycle plastic by shredding it and using it as a fiber. Or by burning it, recapturing no more than 15% of its energy potential. It would be better to bury it, so in the future it could be strip mined when it is actually more valuable.

It's true the prices are distorted by interventions and policies, but the appropriate fix isn't subsidized recycling. It's clearly-defined and well-enforced property rights. I addressed this in my very first article for Forbes. The paper on which the Forbes article is based was recently published in the Quarterly Journal of Austrian Economics and can be found here. Murray Rothbard's essay "Law, Property Rights, and Air Pollution" is one of the contributions on which I rely.

COMMENTS (10 to date)
Dave Tufte writes:

The landfill as inventory insight is useful, and can be carried fairly far in principles.

The flip side to this is that the store is your inventory to. A lot of bad buying decisions are motivated by not understanding that you are adopting the good and the costs of holding it in inventory in your own home.

On a personal note, this comes up in my house about returning cheap items that didn't quite work out: why does it make sense to warehouse a bad purchase that we might use later on, when we can get our money back and not have to warehouse it at all. Of course, the transactions costs of the return have to be considered, but when it's Wal-Mart or the grocery store we go to every few days ... those costs are pretty low.

Daublin writes:

That's a really great article. I particularly like your section on "church". As well, your debunking of the naive views on recycling are welcome. It's outstanding all in all.

That's why I'm surprised by your conclusion. In essense, you propose that the costs of disposal be paid up front by manufacturers. For example, McDonalds might have to pay a charge up front for every styrofoam container it buys.

The problem I see is in the expense of calculating what the accurate costs are that they should pay. It might well be that the costs of doing all that analysis and all that paperwork are already higher than the costs of disposal, even including the hidden environmental costs. It's worse than that, though. Any attempt to measure the costs of disposal at manufacturing time is going to involve a heavy regulatory structure around manufacturing processes; thus, it will become even harder to experiment with alternate manufacturing processes. Just like everyone wants an employment contract that the IRS will understand, every manufacturer will want a manufacturing process that the Tsar of Disposal Fees will want.

My intuition is that the best approach is to suck up the disposal costs as part of the costs of living in a city. I've admittedly not studied the problem the way you have! It just seems like reasonable landfill maintenance is relatively cheap . You dig a hole, put stuff in, and then bury it all when it's full. Maybe you line it, maybe you add some chemicals to make everything break down faster. Is a well-made landfill truly so expensive to operate?

Instead of Good People going to church at the recycling center, I'd rather see Good People voting for better landfills.

Daublin writes:

I'm sorry, the article in question is by Munger. So s/you/Munger.

MikeP writes:

I have been known to comment as I throw something in the trash rather than hunting down a recycling bin something to the effect of, "It's now that much more valuable at some future time to mine the landfill."

MingoV writes:

I lived in Long Island ten years ago. Multi-component recycling was mandatory. During a public meeting, the city council sheepishly admitted that it had to pay recycling businesses to remove all classes of recyclables, including aluminum. Recycling became voluntary, which made the charge per ton higher. The city taxpayers' money was being used to soothe the consciences of environmentalists. All trash, even that in recycling bins, went to the landfill a few years later. Soothing consciences cost too much.

ThomasH writes:

Some recycling is (probably) efficient because the CO2 emission costs of manufacturing new materials is not taken into account.

James writes:

"...the appropriate fix isn't subsidized recycling. It's clearly-defined and well-enforced property rights."

Many of the people you need to convince have already made up their minds that they just want more recycling. Clear and well enforced property rights don't necessarily lead to the preferred outcome of more recycling and are therefore not the appropriate fix for that reason alone.

Thomas Sewell writes:

People routinely recycle houses, cars, bikes and most of what you'll find in a pawn shop or on craigslist. There's no government/social encouragement required to convince people that it's ok to live in a "used" house that requires a few repairs rather than building a brand new one.

The difference in that type of recycling is that it actually makes economic sense, vs. the kind of municipality/government/school encouraged recycling which is nothing more than ritualized worship of world enviro-socialism and association with the "cool kid" celebrities disguised as superior moral preening.

Marc A Cohen writes:

In the city where I live there is a well known metal recycling business called Frankenstein's. He advertises on billboards and local radio stations offering cash for anything with metal in it. He doesn't pay a LOT, but enough that in the past when I had old broken appliances I brought them to him instead of throwing them away. And of course all around town homeless men collect cans from people's trash to hand over for cash.

It sounds like this is uncommon nationally. Is my city an outlier, or is this something that will become more common as commodity prices increase?

zi xiu tang writes:

I misplaced about 20 kilos inside of a month. I misplaced 10 lbs . my first 2 weeks! Ordered my 2nd box now. Have about 60 extra pounds to lose! Must use with eating plan and regular work out.

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