The Economics of Waste

Richard C. Porter

• Publisher: Routledge
• Year: 2010
• Print ISBN: 9781138167582
• eBook ISBN: 9781136524370
• Topic: Biological Sciences
• Subtopic: Ecology
• Index: Biological Sciences

In this concise, engaging, and provocative work, Richard Porter introduces readers to the economic tools that can be applied to problems involved in handling a diverse range of waste products from business and households. Emphasizing the impossibility of achieving a zero-risk environment, Porter focuses on the choices that apply in real world decisions about waste. Acknowledging that effective waste policy integrates knowledge from several disciplines, Porter focuses on the use of economic analysis to reveal the costs of different policies and therefore how much can be done to meet goals to protect human health and the environment. With abundant examples, he considers subjects such as landfills, incineration, and illegal disposal. He discusses the international trade in waste, the costs and benefits of recycling, and special topics such as hazardous materials, Superfund, and nuclear waste. While making clear his belief that not every form of waste presents the same amount of risk, Porter stresses the need for open-minded approaches to developing new policies. For students, policymakers, and general readers, he provides insight and accessibility to a subject that others might leave out-of-sight, out-of-mind, or buried under an impenetrable prose of statistics and jargon.

CHAPTER

1

Economics and Waste:
An Introduction

Where complex issues are involved, we must rely on analysis to help. Intuition and goodwill alone will not suffice. It is not really important that the analysis will be accepted by all the participants in the bargaining process. We can hardly expect that information systems will be so complete, necessary assumptions so obviously true, or constraints so universally accepted, that a good analysis can be equated with a generally accepted one. But analysis can help focus debate upon matters about which there are real differences of value, where political judgments are necessary. It can suggest superior alternatives, eliminating, or at least minimizing, the number of inferior solutions. Thus, by sharpening the debate, systematic analysis can enormously improve it.

—Charles Schultze, The Politics and Economics of Public Spending, 1968

The United States of America has become one of the richest countries in the world, which means that it produces huge amounts of goods and services for its citizenry. Alas, along with these “goods” come “bads”—and one of the most pervasive of these is waste, things that we don't want but that can be dangerous or expensive to get rid of. Between 1960 and 1996, while the U.S. living standard (i.e., real gross domestic product per capita) was doubling, the volume of municipal solid waste (MSW) was rising from 2.7 to 4.3 pounds a day per person. As early as 1970, one author ranked waste in importance with air pollution and water pollution by calling it the “third pollution” (Small 1971).

As these numbers suggest, waste generation has positive income elasticity—that is, generation grows as income grows. The cities of Western Europe, as well as those of North America, generate more solid waste than they did a century ago, and they generate more solid waste than cities in poor countries do today (World Bank 1998, Data Table 9-3). The good news, however, is that the income elasticity of waste generation is less than one—a doubling of living standards does not double the concomitant waste. Part of the explanation is the relative shift of rich countries away from goods, and their attendant packages, toward services, which are less waste intensive. But part of the explanation is that even poor countries generate a lot of waste, albeit of a different kind (Table 1-1). The relative decline over time in the amount of putrescent matter—less euphemistically, stuff that rots—reflects the increasing industrial treatment of foodstuffs and the increasing use of sanitary wrapping and refrigeration; and the decline in ash reflects the movement away from coal and wood for heating and cooking.

Not only do we produce more solid waste as we get richer, but also we produce more of it in our growing cities, where it presents special problems. Waste, as with many other forms of pollution, is not much of a problem if it is produced in small quantities and then spread out thinly. But as countries grow richer, agricultural productivity rises and farmers are freed for nonagricultural occupations. These new occupations are usually urban occupations, which means that cities grow and waste becomes a more serious esthetic and health problem. There is evidence of extensive concern with waste as early as 2500 B.C., in the Indus Valley city of Mohenjo Daro (in what is now Pakistan). Drinking water flowed into houses in troughs; liquid wastes went out in separate troughs; and solid waste was dumped into a pile outside the house or into street-corner bins and was then taken out of the city by regular municipal employees (Niemczewski 1977). The first dumps began to appear in Greece as early as 500 B.C., and edicts forbidding littering were promulgated two centuries later.

The modern era of waste concerns began in the latter part of the nineteenth century, as slums grew and the connection of waste to public health problems became established (Melosi 1981; Alexander 1993). Water treatment, sewage systems, regular solid waste collection, compactor trucks, trash dumps, and waste incinerators all emerged in the early part of the twentieth century in Western Europe and North America.

In the latter part of the twentieth century, new concerns emerged. We thought we were producing too much waste. Indeed, most international estimates show the United States generating half again as much municipal solid waste per capita as most other industrial countries (OTA 1989b; Weddle 1989; Alexander 1993). We also began to recognize dangers in our incinerators and landfills. These concerns led to new waste policies—and economic analysis of these policies is what this book is all about.

What Is Waste?

Waste is stuff we don't want—and hence we are willing to pay to get rid of it. We are going to ask these kinds of questions: How much waste do we generate? How do we get rid of it? How much does it cost to get rid of? We are going to distinguish between private and social cost. ( The private cost of waste disposal is what the waste generator pays. The social cost is what it really costs society to dispose of that waste. The two concepts differ because of external costs and hidden subsidies. If these concepts are not familiar, read Appendix A on page 11.) But before attacking these bigger and more interesting questions, we must attend to a few definitional matters.

Waste goes by many names—trash, rubbish, garbage, refuse—and for some purposes it is important to make fine distinctions. Here, however, we shall use just the word “waste” to refer to anything that is no longer privately valued by its owner for use or sale, and the word “trash” for household waste. From an economic viewpoint, what is interesting is not the exact source or composition of the waste, but rather the cost of handling it and its effect on health and the environment if incorrectly handled.

Table 1-1

Relative Composition of Waste in Urban India and the United States (pounds per day per capita)

Category of material	Urban areas, India	All of United States
Putrescent matter	0.68	1.66
Paper	0.02	1.64
Plastic, rubber, leather	0.01	0.41
Glass	0.00	0.29
Metals	0.00	0.36
Ceramics, dust, ash, stones	0.17	n.e.
All other	0.03	n.e.
Total	0.91	4.36

Note: n.e. means not estimated (though surely near zero).

Sources: Diaz et al. 1993; U.S. Bureau of the Census, various years; 1997 data.

Once the law becomes involved, of course, exact definitions become important. In the Resource Conservation and Recovery Act (RCRA) of 1976, solid waste is defined as “any garbage, refuse, sludge from a waste treatment plant, water supply treatment plant, or air pollution control facility and other discarded material, including solid, liquid, semisolid, or contained gaseous material resulting from industrial, commercial, mining, and agricultural operations, and from community activities” (http://www4.law.cornell.edu/uscode/unframed/42/6903.html).

To an economist, two other solid waste distinctions are more interesting. The first is the distinction between municipal solid waste and other solid waste. MSW is the trash of households and small businesses that is picked up by municipalities— or by private waste haulers where municipalities either do not provide the service or contract it out. This service is usually provided cheaply and often at no marginal private cost (MPC) at all to the waste generator. Typically, any business that is satisfied with a weekly pickup and generates only modest waste can qualify for this MSW collection. Those businesses that produce putrescent matter or large quantities of waste generate so-called other solid waste and must dispose of it themselves or hire a private hauler to remove it. We will deal with this other solid waste in the next chapter and thereafter focus on MSW (in Parts 1 and 2).

The second distinction is between hazardous and nonhazardous solid waste. Under RCRA, all solid waste is defined as either hazardous or nonhazardous, and there are special sets of rules regarding the handling and disposal of each type of solid waste. In fact, of course, almost all solid waste is potentially hazardous, because improperly handling and disposing of it can pose an environmental or health danger. These hazards can range from the slight esthetic disutility of newspaper litter to the formidable carcinogenic capacity of dioxins. While recognizing that all waste lies on a continuum of hazard, we will nevertheless accept the RCRA polarization for organizational purposes. (Hazardous waste will be left to Part 3.)

Tight definitions are necessary, not only for legal purposes, but also for quantitative ones. It would be impossible to estimate the total amount of MSW if we did not have a precise definition of it. But the measurement problem transcends definition. Almost nobody closely measures the weight or volume of MSW as it is collected and disposed of, so roundabout estimates are needed. The U.S. Environmental Protection Agency (U.S. EPA) estimates the total weight of our MSW by estimating materials flows through the economy. What goes into products is assumed to later come out as MSW. (It is of course not quite that easy; input data must be adjusted for exports and imports, the average lifetimes of different products need to be estimated, and wastes for which production data are not avail-able—particularly food and yard waste—need to be estimated by sampling.)

Is It All a Matter of Definition?

In the fall of 1997, the City of Chicago announced that it was meeting the State of Illinois goal of 25% recycling. Half of this “recycled” material is yard waste that contains so much glass and other debris that it cannot be composted. So it was sent to a nearby (closed) landfill despite a state law prohibiting the disposal of yard waste in landfills. But city officials maintain that the yard waste is not being put in the landfill, but rather on the landfill—as landfill cover. And landfill cover qualifies as recycling (Greenwire 1997a).

On 2 July 1996, the mayor of New York City declared the city's legal goal of 25% recycling to be “absurd ... irresponsible ... and impossible” (Toy 1996a). On 3 July 1996, the mayor declared that the city was meeting this goal. What happened between these two otherwise uneventful days? The mayor decided to count as recycled the 30,000 abandoned automobiles that the city towed and sold to junkyards each year and also the debris from construction sites that the city ground up into gravel to construct the internal roads at its Fresh Kills landfill. These two redefinitions lifted the recycling proportion from 14% to the required 25% (Toy 1996b).

Private estimates of MSW use surveys, asking relevant state agencies how much MSW has been generated. The U.S. EPA estimate is always much smaller—for example, the 1998 EPA figure was 220 million tons, whereas that of the BioCycle survey was 340 million tons, half again larger (Franklin Associates 2000; Glenn 1999). The difference may come from wastes missed by the EPA, but it is probably mostly due to overstatements by the states, which mistakenly include some industrial, mining, agricultural, or commercial wastes in their MSW reports.

Solid waste is usually measured by its weight—as in the previous paragraph— but its volume also matters, and the two are not related one to one. What the typical U.S. household puts out as trash has a density of about 10 cubic yards per ton, but the collection truck then compacts that to under 4 cubic yards per ton. (Trash is much denser in poor countries, where it consists of less paper and more food waste and ash.) If the trash goes through a transfer station, it may be further compacted to less than 2 cubic yards per ton. (Why trash might be transferred from one vehicle to another will be discussed in Chapter 3.) Some landfills and incinerators charge by the ton, some by the cubic yard. Here, we will use the two measures interchangeably, but keep in mind that conversion between them is not straightforward.

Why Think Economically about Waste?

Before launching into the serious business of thinking economically about waste, we should stop for a few minutes and ask why we should think economically at all. It is certainly not everybody's cup of tea. Many would prefer to think about protecting our environment, saving our planet, or ensuring our future. To the purest environmentalists, thinking about economics seems a little mundane, if not misguided and misguiding. At the other extreme, to the truest believers in market efficiency, economics seems unnecessary since waste markets work well and there is little, if any, need for public policies to correct failings. Such market believers tend also to think that if you were (somehow) to discern a market failure in waste, you would risk greater government failure if you tried to correct it.

I feel very strongly both ways. Economics is not everything, and most markets do work pretty well. But I still think that economics can help to give direction to our waste policies—by showing where, in what ways, and how badly waste markets fail, and by estimating the costs and benefits of various actual and proposed policies to correct these failures.

To think economically, one must start with the assumption that people are basically rational, knowing what they have, what they want, and how to go about making themselves better off through their economic choices. If you don't believe that is roughly true, prepare to stop reading at the end of this paragraph. But before you stop, think about what alternative assumption you want to make about people's economic behavior. The assumption of knowledge and rationality may not be very good, but as Winston Churchill said of democracy, it is the best we have been able to come up with. Furthermore, if people are making irrational choices on the basis of imperfect information, then how are we going to set policies aimed to make people better off? The very thought invites replacing consumer sovereignty with benevolent dictatorship. If you don't like the economic paradigm, then you are skeptical of the values of democracy.

With these assumptions about rationality and information, we can conclude that anything that makes one consumer feel better off, and nobody else worse off, is a good thing. Making people better off is what thinking economically is all about. When we have reached a point at which it is impossible to make anyone better off without simultaneously making someone else worse off, we have reached a situation of “economic efficiency.” That's the goal of thinking economically about policies and projects.

Trouble in Happyville

You are mayor of Happyville, a town of 1,000 people. The drinking water in Happyville is naturally contaminated with a substance that scientists unanimously agree is harmless, but which residents are convinced causes the cancers that periodically strike the town. They are so concerned that they insist you install a special water purification system that costs $1 million a year. Should you install it? There are three possible answers (Portney 1992).

First, you could declare the inhabitants to be ignorant and/or irrational, refuse to install ...

Table of contents

• Front Cover
• The Economics of Waste
• Title Page
• Copyright
• About Resources for the Future and RFF Press
• Contents
• Preface
• 1. Economics and Waste: An Introduction
• Part 1. Solid Waste Creation, Collection, and Disposal
• Part 2. Recycling Solid Waste Products
• Part 3. Recycling Solid Waste Products
• Part 4. Final Thoughts
• References
• Index
• About the Author