Art Carden  

Landfills as Inventories

Robert Murphy on Capital and I... Piketty Bleg...

In honor of of the estimable Mike Munger's 25th appearance (!!) on EconTalk, I thought I'd offer a couple of words about what's probably my favorite Munger EconTalk podcast: "Munger on Recycling," from July 2, 2007. Here's his accompanying article "Think Globally, Act Irrationally: Recycling", and here's Jane Shaw's article on Recycling from the Concise Encyclopedia of Economics.

Munger made a prediction that has stuck with me for over seven years now: people will someday be mining old landfills to reclaim plastic in order to process it into fuel. After all, plastic is a petroleum product, it burns well, and while we don't have the technology yet (to the best of my knowledge, anyway), I could see this happening at some point.

I feel a bit of guilt when I throw away bottles, cans, and other products that don't rot easily, but I suspect that's residue from propaganda--and I use that word intentionally--I swallowed as a middle schooler. I don't feel as much guilt as I otherwise would, however, because the bottles and cans I'm throwing away are going into a gigantic inventory where they can be recycled and reprocessed when the price is right.

I've seen the claim that recycled aluminum uses 95% less energy than aluminum mined from the ground, but this makes me a bit suspicious: if the 95% energy saving is a free lunch, then we should see a massive market for used aluminum that doesn't have to be subsidized to be viable. Perhaps the energy saving number is accurate, but there are other costs that make using recycled aluminum cost-prohibitive. Here's something to consider, inspired by some recent tweets from Modeled Behavior: if you keep claiming that there's free money on the sidewalk and you don't see anyone stooping to pick it up, the free money probably isn't there.

Are there serious environmental problems? Yes. Is the market for sanitation perfect? Not by a long shot. However, to the extent that there is a solution to these problems it probably isn't sorting our garbage. It's getting the prices right.

Here Professor Munger's blog Kids Prefer Cheese. Here's his blog Euvoluntary Exchange. Here's a recent op-ed in which I and Munger's co-blogger Sam Wilson make the case that Birmingham shouldn't stop Uber.

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COMMENTS (18 to date)
Greg G writes:

I am skeptical that it could be better than today's superb Munger interview but I will give that old episode another look. Thanks for the tip Art.

NZ writes:

Are these subsidized aluminum recycling programs really just ways to keep the hands of bums from idleness? If they can spend all day collecting cans and then cash them in at the end of the day for their food and booze money, then that keeps them from panhandling and also keeps the streets a bit cleaner. Maybe giving them something specific to do is like occupational therapy, too.

I'm not sure about the specific 95% number on aluminum recycling, but there is a massive (mostly unsubsidized) market in aluminum fact, most of the aluminum that has ever been mined is still in use.

I would venture to say that aluminum is the exception that proves the rule.

Phil writes:

I've also wondered if, 200 years from now, archaeologists will be mining landfills for artifacts of early 21st-century life. I used to think they would, but now, with the internet saving all our cultural data, maybe a picture of a Coke can would be enough.

And, the stuff would be so plentiful that it might not have value. You can pick up 24-year-old sets of baseball cards at shows for less than it would cost to mail them down the street.

But there's got to be SOME value in landfills as time capsules.

Phil writes:

Remember when people were stealing copper pipes from foreclosed houses? Did they ever steal anything aluminum?

95% of "not much" is still "not much".

OK, just checked. Aluminum is 86 cents a pound. If profit margins are normal, the cost of creating it is close to 86 cents. How much of that would be rights to it in the ground? Probably not too much? No idea. Let's say 70 cents is marginal cost of production, and the rest is profit and mineral rights.

Marginal cost would be, what? Maybe 1/3 energy, and 2/3 capital? (I should probably delete this, my back-of-envelope guesses might not be even close. But WTH.) I assume when people talk about energy savings, they don't include the energy required to produce the capital that process the stuff.

So, let's say 25 cents energy. At 95% savings, you save 23 cents in energy.

It's easy to believe that it costs more than 23 cents a pound to gather all the cans, transport them to the factory, and get rid of labels/paints/additives that the mining process can't handle in raw inputs.


I guess the analogy is: Solar saves 100% the energy costs of natural gas. That doesn't mean it's really cheaper.

Lupis42 writes:

There is a big market for aluminum - ~1.5c/can if you're selling to scrap dealer, i.e. 50c/lb for scrap cans.

Lupis42 writes:

@Phil -
That's partly because not that much is made out of aluminum.

We can get a pretty good estimate of the savings just by comparing the scrap price of crushed cans (~50c/lb) with the cost of refined aluminum (~86c/lb). So ~36c/lb is the minimum value of the energy savings.

Alternatively, a little research (compare estimates of total aluminum production with estimated amounts of aluminum currently in use) suggests 75-80% of all aluminum ever produced is still in use.

Daublin writes:

Above all, the prices being talked about are small. As a thought experiment, suppose you could pay $5/day and avoid having to sort through your garbage to find the recyclable bits. Is this a bad way to spend your money? It's a really low price, and you get a greater improvement in health and enjoyment than you would from going to a movie.

Why does it make you a bad person who deserves to feel guilty, if you want to pay your way out of sorting through garbage?

An additional concern is specialization. Even if these small costs are worth recovering, why should we all do it individually? We will do a much better job if we treat waste management the same way we treat agriculture, electronics, motor vehicles, air transportation, and a zillion other parts of the econmoy: have a few people specialize and take care of it for the rest of us.

In the case of waste management, shouldn't we just have someone at a central plant sorting out the recyclable bits? At a central plant, they can invest in extra equipment, and they can develop a training regimen. They are going to be much better at it than a random joe, which is yet anothe reason for skepticism: if recycling is so important, then why isn't it important that it be done well?

Dan Hill writes:

@Daubin makes a good point. I suspect A lot of residential recycling actually detracts value by polluting the recycling stream with material that is uneconomic to recycle. Put another way, not only does adding all those newspapers to my recycling bin not result in a net gain (even ignoring the value of my labor), but it increases the cost of getting at the truly valuable stuff like the aluminum. Dare I say the real return is signaling my values to my friends and neighbors.

On the issue of recycling aluminum, the energy content is incredibly high which is why bauxite is shipped great distances to smelters located near cheap electric power (especially hydro). In the aluminum smelting business the finished product is jokingly referred to as solid electricity. I'm sure aluminum cans are economic to recycle - if you don't have to sort through a whole bunch of newspapers to get to them!

db writes:

Keep in mind that in some areas there is not any sort of a free market in aluminum for recycling, as some states make it unlawful to collect cans for recycling other than to place at the curb for public pickup. The collectors themselves are cronies that have been awarded contracts at above market values and are granted a monopoly in aluminum recyclable collection in order to guarantee their profits.

For instance, in Pennsylvania, I believe it is technically illegal to collect cans for recycling, with the possible exception of cans collected in one's own home, produced as waste from one's personal activities.

sourcreamus writes:

When I was a kid there was a market for recycled aluminum cans. People would crush soda cans and save them in big plastic bags. Then either the boy scouts would collect them to take to the recycling center or you could go yourself. We raised money for a class trip with recycling aluminum in seventh grade. Unless you had alot of cans it really was not worth it, but it did exist.
Nowadays either the trash company is making money recycling or the use of recycling bins killed the business model.

Tom West writes:

At least 20 years ago, it was the money that the municipality made recycling Aluminum cans that paid for the slight loss from recycling paper. So, it at least used to pay quite well indeed.

Personally, I find the attention that people are forced to pay to recycling seems to have a run-on effect on their general attitude towards garbage. There seems to be a lot fewer people just tossing garbage out of car windows now-a-days.

I also notice a correlation between garbage on the streets and existence/non-existence of local recycling programs, but that may be confirmation bias on my part.

As always, the first order effect of a government program can be the least important. Severe drunk driving laws didn't make that big an effect until the psychological effect of these laws existence had permeated enough so that driving drunk became a *social* crime as well as a legal one. Fear of getting caught was easily eclipsed by fear of your friends thinking you're a jerk.

Likewise I think the psychological effect of recycling laws makes us (in general) more careful with our garbage in general.

Robert writes:

Aluminum is a poor example to use -- aluminum recycling is actually quite profitable and helps subsidize the un-sustainable recycling of other materials.
Another big recyclable material is steel -- 2/3 of steel comes from recycled sources. But I don't think we need to do anything to our home waste stream -- magnets can be used to extract it.
Of course, a lot of steel comes in big chunks that are obviously economic to recycle, like cars and appliances. But the vast majority of steel packaging is also recycled.
Here's the steel industry's page on it:

ThomasH writes:

It's probably too small to be worth administering (but who knows how administrative technology may improve in the future) but you ought to get a small credit as pat of the carbon tax for burying a hydrocarbon compound where it cannot release CO2 into the atmosphere. I think the idea that it is "bad" to bury plastic came from the old fashioned ideas that we would "run out" of petroleum.

Mr. Econotarian writes:

Trash scavenging is widespread here in LA, you see someone on almost every block doing it...

Los Angeles needs better system to avoid trash, recyclables scavenging

"We have all seen them as they prowl the night, and sometimes the day, pulling out bottles, aluminum cans, plastics; anything of value...Blue bin scavenging is illegal in L.A. It is punishable with a $500 fine and/or six months in jail, but I’ve yet to see anyone stopped by police. Maybe we should model after the City of Anaheim, which implemented an anti-scavenging program in 1994 to help protect revenues."

Tim Worstall writes:

Re aluminium.

Alumina, the aluminium oxide we make aluminium from, is neither scarce nor expensive ($500 a tonne as a rough guide, after it has been extracted from the ore, bauxite). But it costs some $900 a tonne of finished aluminium in electricity to turn that oxide into the metal. That's what is being saved by recycling aluminium. You can just melt the old into the new shapes, without having to convert the oxide to metal.

So soda cans, just like any other form of aluminium, *when collected* are profitable to recycle and thus it's a great thing to do. The same is true, for slightly different reasons, of copper, nickel, steel and so on. The metals business almost certainly does more recycling than any other industry (and the precious metals one definitely).

However, there's a lot of weight resting on that *when collected*. The scrap industry's economics are the opposite of the way we normally think. One iPhone among thousands at a Foxconn plant in China we recognise is worth less, as a piece, than that same iPhone sitting on the shelf in the Apple Store when you want to buy one. There are volume discounts in just about everything (ignore transport etc here, this is still true. One of thousands of something is worth less than one alone of something, usually).

Scrap recycling works the other way around. You get volume premiums. One soda can is worth nothing. Not even worth picking up. 500 tonnes of soda cans in one location will have a higher value for each soda can.

It's obvious when you think about it, for this is true all all raw materials. Value rises the closer one gets to what is an economic amount to process, given whatever your processing technology is. Scrap works in exactly that manner. When you go over those normal economic processing amounts (say a furnace can take 50 tonnes of scrap Al, not far off reality) then a 5,000 tonne pile is worth marginally less per tonne than the 50 tonne pile just ready for processing. But one tonne of material is worth less per tonne than either the 5,000 or 50 tonne piles per tonne.

In the end this means that the most important number in recycling is "what is the cost of collecting an economically processable amount?". That changes with the technology used in collection of course but it is the most important question of them all.

steep writes:

Perhaps we should stop calling our garbage repositories "landfills".

"Resource Banks" sounds like a better name.

Max writes:

I am for Europe, where we not only recycle bottles and cans but also all kind of garbage. While I still believe that this is more wasteful than useful, I actually think that the collateral that is on every bottle is a good idea.

Many people just throw the bottles away and with the collateral we finance the clean up necessary due to people who are even too lazy to bring the garbage to the bin.

However, there is a totally different system that only wastes energy while not creating much of worth and that is the recycling system on house waste disposal. And here I can totally understand Mr. Mungers point.

On the issue of Aluminium, I can only say that from a technical point of view, Aluminium is the only recycled material that is actually valuable. Making Aluminium from scratch is energy intensive and thus very costly in Germany. The recycled aluminium is a tad bit less expensive.

Another material that is quite a bargain to recycle: Copper wire.

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