The Economics of Trash

Trash is a fundamental economic concept.  In today’s society everyone produces huge amounts of trash through consumption of goods and services. In fact, on average Americans generate over 700kg of the stuff every year.  This statistic is problematic because of the huge environmental impact that much trash has on the earth’s resources and climate.  This begs the question: what determines what can be recycled and what is trash.  Part of the answer to this question is scientific.  Some waste simply isn’t recyclable due to the composition of the waste.  The other part of the answer can be found when we examine the economics of it all.


Recycling is a business.  Like any business there are costs to the production, and there is a demand for the product of the production. Now, because recycling is a business, it must be economically viable, these firms must make a profit.  Some materials, though they are recyclable, have too high a processing cost to make their recycling profitable.


(Though the percentage of recyclable materials have been going up, not all of the material is being recycled)

Plastic bags are an example of a recyclable material that is on the edge of what is recyclable and what is not. To understand why plastic bags are on this line of a recyclable item and a landfill item, we have to examine cost of producing a new plastic bag.  Plastic bags are made of low quality plastic and therefore, are typically cheap to produce.  Furthermore, the production of this plastic is related in production to the petroleum industry.  When the cost of petroleum decreases significantly, the cost of producing a new plastic bag does as well. Recently, the petroleum industry has been doing just this. Because new low-quality plastic has become so cheap to produce, recycling firms can’t compete with their competitor’s prices.

In fact, this has been happening to a lot of recyclable products, not just plastic bags.  Recycling has taken a huge hit in the past few years.  Private firms have been going out of business all over the United States because of dropping prices of the newly produced substitutes.  This drop in recycling has a significant environmental impact that could be avoided, begging the question: How can we ensure that everything that can be recycled gets recycled? Are government controlled recycling centers more likely to process collected recyclable materials? Currently the private sector for trash collection is beyond 50 percent.  Is it worth taxpayer money to subsidize these recycling centers to ensure they are doing everything they can?

-Eric Rannestad


—- ^ great podcast, you all should take a listen.


One thought on “The Economics of Trash

  1. taylorqjohnson says:

    This issue with recycling is interesting and also very difficult to solve. Perhaps one solution to this problem could be to set a price floor for the newly produced substitutes for recycled products. This way, recycled products would be cheaper than new products for consumers to purchase.


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