Sunday, November 17, 2013

Do We Recycle Too Much? A Look at the Economics of Recycling

Reduce. Reuse. Recycle. This was the common environmental mantra of the last couple of decades of the 20th century. I remember that slogan being hammered in during elementary school. They really put a lot of emphasis on the recycling portion, and it seems to have worked. About nine in ten individuals recycle, and why not? If there are such benefits to recycling, then we feel like we're making a difference in the environment because we are preserving scarce resources. But what do we do if recycling is nothing more than feel-good environmentalism?

Recycling is the process of converting previously used products into new products that would have otherwise been discarded as waste. Even with the economic complexities, the government intervenes in hopes of improving upon the situation. In many areas (e.g., Des Moines, Phoenix, MinneapolisNYC, Scranton, PA, Australia, United Kingdom), cities enact price floors, which are government-imposed price limits as to how low a good can be valued. If the price floor is set above market price, which it usually is, then the government policy will create a surplus. There are also mandatory collection laws that cause an outward shift of the supply curve, which, all things considered equal, will cause an increase in supply and a decrease in price. The Environmental Protection Agency (EPA) also has enacted procurement policies, as well as the FTC's enactment of mandatory recycling product labeling, to encourage more recycling. These are just some government policies that encourage more recycling.

To justify this level of interventionism, one could argue that the market does not accurately reflect the total benefit of the good because that which would be recycled appears to be trash, not resources. As such, the market underprices recyclable goods based on incomplete information. I'm not making the argument that voluntary recycling is a bad idea. If it is cheaper for an individual to recycle a good because it would save resources, then of course the individual should be allowed to do so! People have voluntarily recycled items for centuries, whether in the form of economic transactions or scavenging. But if it is more mandatory (not the "put a gun to your head" sort of coercion, but even a quasi-enforceable law is still problematic), I still have to wonder whether the government knows best.

One of the arguments used to advance recycling is that we are running out of space to construct more landfills. First, the number of active landfills has decreased from 8,000 in 1988 to 1,908 in 2010. Second, and more importantly, we are not running out of landfill space. In spite of regional disparities, landfill capacity is not an issue (EPA, p. 14) because we have plenty of space. Furthermore, landfills do not have the environmental concerns that existed 20-30 years ago.

There are also environmental costs to consider. Recycling is a manufacturing process, and like all manufacturing processes, it pollutes. The trucks that carry recycled goods still emit exhaust. Contamination is also an issue. If there are toxins in the original good, odds are that it end up in the new product.

Although the benefits of recycling are lauded to excess, it seems like none of the proponents ever stop and think there could be costs. To name a few: time spent by the consumer to sort trash, water and electricity used to clean household trash, recycling containers, collection costs, transportation costs to and from collection centers, labor costs of sorting at the recycling plant. It is difficult to accurately say whether the costs exceed the benefits because the economic efficiency of recycling is so location-dependent that it's not even funny, although some have tried (e.g., Aadland and Kaplan, 2013).

Ultimately, I do not think the issue is as simple as "should we recycle or not?" Some things are worth recycling. Iron and steel are cheaper to recycle than their virgin forms. Aluminum is considered valuable in the market, so people are more likely to voluntarily recycle aluminum. Cardboard can be recycled into a wide variety of paper products, and they also have low collection costs. Recycling asphalt pavement is also useful. Other materials, not so much. It is difficult to recycle plastic because of the various resins cannot be mixed during reprocessing, which means additional sorting costs, not to mention relatively low costs of producing new plastics. Only 8% of plastics were recyclable in 2011. Recycled newspapers need to be de-inked. Even if the sludge from the de-inking process were not toxic (but it is), the sludge still would still need to be disposed. Also, let's not forget that trees are renewable resources. Converting glass into cullet isn't cheap, either. Glass comes from sand, which is one of the most abundant resources on this planet.

Even with the recycling fervor, we still produce tons of garbage. About 65% of municipal waste is still sent to landfills. Landfills will continue to be a part of waste disposal, and are arguably cheaper than recycling. If you are worried about the amount of waste, ask yourself why there is so much waste produced in the first place and how we can do things like consume less or develop more environmentally friendly processes.

If there is a scarcity in a given resource, that will be reflected in market prices, provided the fact that the government does not intervene and distort those prices. When people recycle voluntarily, they conserve resources and raise overall wealth. When forced to do so, society incurs unforeseen costs. Having the government force people to recycle is a load of rubbish.

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