As is his wont, Mike Munger speaks vast amounts of sense in this month’s Cato Unbound, focusing on the political economy of recycling. I’ve never seen a better articulation of the various energy and economic tradeoffs associated with recycling than Mike’s presented here.
For example, Mike does a great job of pointing out the reasons why municipalities underprice landfill dumping — to reduce incentives for the illegal dumping and burning that it’s costly to monitor and enforce — and how that incentive may at the margin create reasons for recycling, even though lots of recycling uses more energy to process waste and create a not-very-valuable “resource”. He concludes by arguing for a nuanced view of recycling as a matter of policy:
Neither the simplistic “if it’s recyclable, it should be recycled!” view nor the “let unfettered markets handle it!” perspectives are defensible. For sound economic reasons, advanced nations underprice landfill space, often by substantial margins. If you think that doesn’t matter, just take a look around at all the ad hoc dumps, burning, and trash in developing nations.
The problem with underpricing landfill space is that we throw away many commodities and old packaging that could be disposed of more cheaply in some other manner. It is at this point that the price system would be of value, but it’s because people are insulated from actual prices that we have the problem in the first place.
As a “second-best” solution, since we are denied the first-best price solution, we try to divert commodities out of the waste stream using moral suasion, appealing to public spirit rather than to the self-interest of the citizen. But this requires that we elevate the value of the landfill space somehow in the minds of those we are trying to reach. Unfortunately, without prices to guide us there is no limit on the value placed on landfill space, and we begin to make a fetish of garbage. In extreme cases, citizens and public officials may even begin to try to divert garbage that should, on economic grounds, actually be disposed of in the landfill. And when the relative scarcity of commodities changes because of the dynamics of modern economies, it may be very difficult to explain adjustments to those citizens who are persuaded that “Recycling is always cheaper, no matter how much it costs.”
Mike applies property rights logic to argue that a better approach would be to assign packaging disposal liability to the manufacturers of products, to align their incentives to reduce packaging and/or make it easier to reuse or more biodegradable.
Not surprisingly, for a lot of consumer products this is already happening without regulation or legal precedent, brought into being in the market through reputation mechanisms. Companies as diverse as Apple and Amazon have been changing their packaging (minimizing it consistent with cushioning, replacing plastics with cardboard or with plant-derived plastics) in response to consumer preferences and perceptions. Wine shippers have moved from styrofoam to molded cardboard to hold bottles in boxes. And those are just the examples I have off the top of my head.
The richness and depth of Mike’s analysis is superb, and not to be missed. I look forward to the rest of the contributions over the month.