Wednesday, February 22, 2006

Useful Doodoo?

Across America, a common consensus seems to have been reached by Americans that recycling is a good thing. In most cases however, recycling turns out to be more costly than if we simply used up more of the resource. This is often true whether we look at recycling from an economic point of view or the point of view of environmental conservation. Paper recycling, for example, often causes more pollution than paper production because of de-inking, and it often costs more as well. In looking at recycling from an economic perspective, we want to know if the marginal social cost is less than the marginal social benefit. We know this if private companies can turn greater profits by recycling than without recycling, as long as no market failure occurs.

However, the government often gets involved in the process, subsidizing, advertising, mandating, or even fully providing the recycling of various products. such government interference should take place only if market failure exists. Such failure esists if a) a monopoly exists, (b) an externality (unintintional, nonmarket interaction) exists, or (c) the good that is traded is a public good, meaning it is rival in consumption and non-excludable.

First of all, no one has a monopoly on recycling. Secondly, if an externality exists, such as air pollution the recycling of a product should be subsidized or taxed, depending on whether the externality is positive or negative respectively (negative in the case of pollution). The implications of this could mean that the recycling of certain products, such as paper mentioned above, should be taxed, not encouraged! If sustainability produces an additional benefit to society not taken into account by consumers, this market failure would be dealt with here too. Finally, recycling does not provide a public good because recycled products are rival and excludable in consumption.

Having analysed when government involvement is acceptable or even necessary in recycling, I want to look at a case that seems to be an efficient amount of recycling. The link to FoxNews leads to a story about the recycling company in San Fransisco implementing a program to recycle pet feces from parks. The feces with be recycled for its methane, which can be sold as natural gas. This recycling company is a private entity (100% employee owned and operated according to its website), so government beauracratic involvement doesn't seem to be the cause here (though it says the city "asked" them to look into this, so they may be subsidizing this). Instead, it seems that a private entity has weighed the costs and benefits and determined that the benefits outweigh the costs, though the article mentions that in most cases, methane production from pet feces isn't very attractive economically, according to some experts. Here however, it seems the private company has a history of financial success in recycling. As long as the city government is not involved, at least not where it shouldn't be from an efficient perspective, then such recycling is efficient in San Fransisco. This also means there is an efficient amount of dog doodoo in parks. Who knew?

Also, if you want more information on recycling from an economic perspective, this link is a good read -

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