DOES RECYCLING WASTE
RESOURCES?
W. Robert Reed
Department of Economics
University of Oklahoma
My Main Point
When recycling loses money
it wastes resources and makes
society worse off.
Therefore
Government should not subsidize
recycling efforts.
Public interest advertising that
encourages unprofitable recycling
lowers society’s welfare.
A Little Background
Professor Reed wrote a column on recycling
entitled “Recycling Does More Harm Than
Good” that appeared in the Oklahoma Daily,
March 26, 1999.
Responses to Prof. Reed’s Column
“Robert Reed has over-simplified the issue of recycling to an
economic issue. This conservative writer is very naïve and
only seems to care about production and profits.”
“[Dr. Reed’s] point that recycling wastes resources or denies
more good for society is absurd.”
“W. Robert Reed’s column on the ‘evils’ of recycling troubled
me. His idea that recycling is harmful because it costs
more money grossly misses the point.”
Professor Anex wrote a response entitled “Recycling Equals
Smart Economics” that was published in the Oklahoma
Daily, April 9, 1999
Prof. Anex’s “Counter” Argument
“…it is much less expensive to use recycled aluminum and
cardboard than to tear the tops off of mountains in Jamaica
for Bauxite or grow trees for wood pulp.”
“Recycled materials are so valuable that they are traded on
the Chicago Board of Trade.”
“Manufacturing firms such as Lucent Technologies have
implemented extensive internal recycling programs
because they reduce costs.”
The Main Point Restated
When recycling loses money
it wastes resources and makes
society worse off.
Definition of a “Resource”
A resource is anything that has the potential
to contribute to society’s well-being.
A “Happiness” Test
Question: How could we tell what would
make you happier? Having a new pair of
Nike athletic shoes? Or having a new pair of
Old Navy jeans?
Answer: By observing how much money you
are willing to pay for these items.
Another “Happiness” Test
Question: How could we tell what would
make SOCIETY happier? Having one more
pair of Nike athletic shoes? Or having one
more pair of Old Navy jeans?
Answer: By observing how much money
SOCIETY is willing to pay for these items.
Prices and Information
The price of a good tells us how much society is willing to
pay for it.
Given certain assumptions*, the price of a good measures
the approximate contribution of that good to society’s
“happiness.”
*We will discuss these assumptions later.
Thus, the fact that PT-BONE STEAK > PMcDONALD’S HAMBURGER
tells us…
The fact that PBMW 528 > PFORD ESCORT tells us…
The fact that PHOME CLOSE TO CAMPUS > PHOME AWAY FROM
CAMPUS tells us…
The Application to Recycling
Professor Anex: “It takes resources to recycle
resources…”
Question: Are the resources used up in
recycling more or less valuable than the
resources that recycling saves?
Answer: That’s exactly what prices tell us!
The Profit Table
Revenues =
Price of Outputs x
Quantity of Outputs
Costs =
Price of Inputs x
Quantity of Inputs
Profits =
Revenues - Costs
The Profit Table Applied to Recycling:
Recycling Paper at UCLA
Revenues =
$7,217
Costs =
> $100,000
Profits =
 - $100,000
Interpretation
Recycling paper at UCLA lowered society’s
welfare.
That is, the resources “destroyed” in recycling
paper (labor, energy, machines) were more
valuable to society than the resources saved.
In other words, UCLA’s recycling program
“wasted” society’s resources.
Using the Profit Table to Evaluate
Recycling Arguments: I
“The revenue from recycling doesn’t offset
any of the costs of recycling, because right
now the market price for materials is at an
all-time low. We are in an over-supply
situation. The market is saturated, and
prices are sinking.”-Carl Hultberg, NYU
recycling coordinator.
Case Study I: The Price of Recycled
Paper is Low
Revenues =
$7,217
Costs =
> $100,000
Profits =
 - $100,000
Using the Profit Table to Evaluate
Recycling Arguments: II
“Our goal is not to make money. We are
trying to reduce the amount of trash that is
taken to landfills, regardless of the cost.”E.J. Kirby, Recycling Director, UCLA
Case Study II: Recycling to Save Scarce
Landfill Space
Revenues =
Revenues from
Recycled Products +
Cost Savings from Less
Dumping
Costs =
Costs of Resources
Used to Recycle
Profits =
Positive/Negative?
Using the Profit Table to Evaluate
Recycling Arguments: III
“We need to recycle paper in order to save
America’s valuable timber resources.”
Case Study III: Recycling to Save
Scarce Trees
Revenues =
Revenues from
Recycled Paper + …
Costs =
Costs of Resources
Used to Recycle
Profits =
Positive/Negative?
Sufficient but Not Necessary
Assumptions
Social Welfare Function = Utilitarianism*
with Constant Marginal Utility of Income
Across Individuals.
* Louis Kaplow, “A Fundamental Objection to Tax Equity Norms: A Call for Utilitarianism,”
National Tax Journal Vol. 48, No. 4 (December 1995): 497-514.
Prices are “market”-generated prices.
Relevant markets are not characterized by
market “failures” such as externalities,
public goods, or monopoly/monopsony.
Failure of These Assumptions to
Hold is a Necessary But Not
Sufficient Condition to Invalidate
the Argument
That is, if one or more of these assumptions do not
hold, they could make the argument against
subsidized recycling stronger, not weaker!
Conclusion
When recycling is good for society, it will
not lose money. When it does lose money,
it is not good for society.