Download Natural Resource Economics: Recycling and Efficient Allocation of Recyclable Resources - P and more Papers Economics in PDF only on Docsity! Handout Natural Resource Economics EconS 330 Instructor: Ana Espinola e-mail: anaespinola@wsu.edu Office Hours: M 10-12 p.m. and by appointment Recyclable Resources: Minerals, Paper, Glass and More (Chapter 9) An efficient allocation of Recyclable Resources Extraction and disposal Cost There exist two variables that increase the attractiveness of recycling: 1. The ring cost of virgin minerals 2. Waste disposal By recovering and reintroducing materials into the system, recycling provides an alternative to virgin ores and reduces the waste disposal load. As long as consumer bears the cost of disposal, they have additional incentive to return their used recyclable products to collection centers. It is essential that a demand exist for the recycled product: • Simply returning recycled products to the collection centers accomplishes little if they are simply dumped into a nearby landfill • The purity of the recycled products also plays a key role in explaining the strength of demand for them. Recycling : A closer look Recycling has increased over time For example Copper. Recycling is not cheap! Several types of costs are involved: • • • • Recycling and virgin ore depletion How does the efficient allocation of a recyclable resource compare with that of a nonrecyclable resource over time?? Example: How much more of this resource was made available by recycling? What happen with old scrap? The market works inefficiently because the product users do not bear the full marginal social costs of disposing of their product. Suppose you have some small aluminum products that were no longer useful to you. The individuals have two alternatives: 1. Recycle them 2. Toss them into your trash When the Private Marginal Cost (MCP) is lower than the Marginal Social Cost of disposal (MCS), the market level of recycling (where the Marginal Cost of Recycling (MCR) is equal to the marginal private disposal cost) is inefficient. Only if all social costs are included in the marginal cost of disposal will the efficient amount of recycling (QS) be attained. Percent Recycled 0% Disposed 100% 0% $/Unit 100% $/Unit The Efficient Level of Recycling Subsides on Raw Materials The subsidy is lowering the cost of extracting of these raw minerals. As a result, raw materials are artificially cheap and can inefficiently undermine the market for recycled inputs. Corrective public Policies • The Old System of Financing Trash collection: Every household pay the same fee regardless of how much trash is produced. • The New System of Financing Trash collection: Lower-income households pay only a flat fee since they don’t need to purchase stickers for additional disposal. Another suggestion for promoting recycling is the refundable deposit. A refund system is designed to accomplish two purposes: 1. The initial charge reflects the cost of disposal 2. The refund, helps conserve virgin materials. The recycling of aluminum beverage cans has been one clear beneficiary of deposit refund schemes. Product Durability From Death of a Salesman, Willy Leman laments: Once in my life I would like to own something outright before it is broken! I am always in a race with the junkyard! I just finish paying for the car and it is on its last legs. The refrigerator consumes belts like a goddamn maniac. They time those things. They time them so when you have finally paid for them, they are used up. Vance Packard identifies three possible types of product obsolescence: 1. Functional obsolescence 2. Fashion obsolescence 3. Durability Obsolescence Durability Obsolescence We have to answer two questions: 1. What is an efficient level of durability? 2. Will the market supply that level? The market process may not work efficiently in two cases: 1. 2.
