Introduction to
Economics
Lesson 5 / 07
Recycling
Recycling has been practiced
throughout history. Since the last part of the last century, however, it
has been pursued with considerably increased vigour. This change has occurred as a result of a significant shift
in focus. Historically recycling occurred because of the economic
benefit to be achieved by producing new products, using cheaper recycled
materials rather than virgin raw materials, or in order to avoid the
costs of otherwise disposing of used materials; in other words, for
profit or for cost avoidance. Thus
scrap metal merchants purchased scrap for melting down and re-use.
Wood ash and coal dust from fireplaces and furnaces was removed
by brickmakers, at no or minimal cost or fee to the owner or producer of
such ash or dust, to be incorporated into bricks, at less cost to the
owner of producer than of otherwise disposing of them.
Modern recycling however is largely not of this type.
Definition
Recycling is the reprocessing of
waste products into reuseable new materials.
It is not to be confused with reusing, which is using the same
product again for a further time, either for the same or for a different
purpose.
Modern Recycling
Whilst profit and cost avoidance
continue as driving motives for recycling, modern recycling is now
driven by a number of other claimed motives.
These include claims that recycling
* conserves
scarce natural resources
* reduces
energy consumption and hence the emission of greenhouse gases
* avoids
waste disposal alternatives that would otherwise pollute the
environment,
such as landfill or ocean dumping
* creates
employment
It is readily discernable that these
motives are different in nature from profit and cost avoidance.
The latter provide their own incentive and are likely to be
engaged in voluntarily by participants in the market.
Conversely, apart from the moral or ideologically motivated, the
new claimed motives are unlikely to provide the incentive needed for the
bulk of the population to engage in voluntary market recycling, which
would otherwise benefit the community.
In economic terms this lack of a market incentive is referred to
as an "Externality".
Externalities
An Externality arises when the
actions of one person affects the well being of others, either
detrimentally or beneficially, but the affect is not reflected in market
prices. This is seen to be
a market defect. Externalities are characterised as either positive or
negative. If I keep my garden clean and tidy and without litter, I
provide a positive Externality for my neighbours, who benefit from the
absence of pollution. Yet I
am unable to charge them for the benefit they receive from my efforts in
cleaning up. As a result I might be less diligent in supplying the level
of cleanliness and tidyness that they desire.
There will thus be a likely undersupply from the optimum level
desired. If they were to
pay me for the benefit they so receive I may be more willing to make the
effort required to supply the desired level.
In the absence of some form of coercion, however, they will be
unlikely to do so. In such
circumstances my neighbours can be described as freeloading; taking the
benefit of the positive Externality, namely the absence of pollution,
but not contributing to its cost. This
is sometimes referred to as the "Freeloader Problem".
Conversely if I do not clean up my
garden but allow pollution to accrue my neighbours will suffer a
detriment or negative Externality caused by my actions
[or absence of them] for which I do not have to pay.
There is thus no market incentive for me not to be lazy or
conscientious and there will be the tendency for there to be an
oversupply of pollution above the level desired, and from which my
neighbours will suffer. In
such circumstances however, the law, [traditionally the law of nuisance,
more recently regulatory penalties] will be likely to step in and
provide an incentive for me not to pollute in the form of damages or
fines.
Public Goods
In economics, a Public Good is a good
that is unlikely to be produced at its optimum level by a free market.
[We have previously discussed the concept in the context of the
lesson on Defence]. In economic terms, to qualify as a Public Good a good must
satisfy two criteria. Firstly
it must be non-rivalrous. That
is to say that once it is produced it is no longer scarce; anyone can
enjoy or utilise it without diminishing anyone else's enjoyment or
utilisation. Secondly it must be non-excludable. That is to say, once it has been produced it is not possible
to preclude anyone from enjoying or utilising the good.
If a good meets the twofold criteria
required it is said to be a true Public Good.
Inherent in all true Public Goods is the Freeloader Problem.
In economics, it should be noted, Public Good does not
necessarily mean the same thing as a good provided by the government or
even goods one thinks should be provided by the government.
A true Public Good, however, is said to require and / or to
justify government intervention, in particular in order to resolve the
Freeloader Problem. Examination
of the new claimed motives for recycling, as referred to previously,
suggests that the goods thereby produced,- the conservation of finite
resources, an improved or safeguarded environment, or increased
employment-, are largely, if not completely, true Public Goods.
Modern recycling, it is argued, requires government intervention,
whether mandating, supplying, subsidising, regulating or whatever in
order to achieve an optimum result.
Examples of Recycling
Perhaps the prime example of market
recycling is aluminium. In
1964, it is estimated only 2% of beverage cans were aluminium. It is estimated today to be about 98% of which about 64% are
recycled Generally,
recycling aluminium cans to make new ones is significantly cheaper than
making them from virgin raw materials.
Used cans are collected relatively easily and cheaply, typically
by boy scouts and charities, and sold back to recyclers.
The scrap cans are then shredded and melted to produce molten
aluminium. An aluminium can is 100% recyclable with no loss of quality.
Apart from the fact that the scrap is relatively cheap, the real
saving is in the saving in energy costs; due to the lower melting point
of scrap compared to ore, it takes only 5% of the energy required to
make a can from virgin raw materials as it does from scrap.
In addition it is estimated only 5% of greenhouse gases are
emitted by recycling in comparison with producing from virgin raw
materials, exclusive of those emitted in the related mining and
transport involved.
Ferrous metals have traditionally
been recycled. The process is relatively cheap and easy. They can be separated
magnetically from the waste stream.
Again the metal is 100% recyclable with no loss of quality.
It is estimated that perhaps 42% of crude steel is produced from
scrap.
The market for recycled glass is far
more dubious. The raw
material, sand, is cheap and easy to obtain.
Glass can be reprocessed indefinitely but because only slightly
less energy is used to recycle than to make new glass, and the
recyclables must first be collected, sorted for colour and transported,
it may be that the cost and the amount of energy required to recycle is
greater than in making anew.
The market for recycled plastics is,
if anything, even more dubious. Compared
to glass or metals, recycling plastics poses many problems.
Plastics are of many different types and recyclables must first
be sorted for compatibility and generally separated from their lids,
which are likely to be of a different type of material.
New plastic is relatively cheap to produce and recycled plastic
suffers from a decrease in quality.
Nonetheless it is estimated that perhaps 20% of plastics are now
recycled.
Many other products and materials are
presently recycled; paper, cardboard, textiles, cars, ships, batteries,
timber, whitegoods, non-ferrous metals and so forth. Exactly how much is economic in market terms is difficult to
say.
Criticism of Recycling
On 30 June 1996 an influential,
albeit extremely controversial, article was published by John Tierney in
the New York Times entitled "Recycling is Garbage".
It purported to demolish the economic argument for modern
recycling and suggest that recycling could be America's most wasteful
activity. Many articles
have subsequently been written addressing the issues raised therein with
the intention of refuting them. Nevertheless the article retains considerable
significance.
Some of the key economic criticisms
of modern recycling include the allegations that it is based on the
fallacies that landfills and incineration are inherently bad or that in
some way there is a shortage of space for landfills.
Also that government intervention and involvement in recycling
has made it difficult if not impossible to calculate whether any
particular instance of recycling is worthwhile or not.
David Sharp