<p>I'm just going to answer one part of the question, the trickiest and most controversial one in my opinion:</p>

<blockquote>
  <ol start="2">
  <li>How to determine the costs/profits of each part.</li>
  </ol>
</blockquote>

<p>It sounds tricky: Even if you find the most efficient way of not-recycling trash (be it burning, dumping on a lake, on the moon, or in a third world country), how do you evaluate the <em>costs</em> of doing that? </p>

<h3>Coase: How can we evaluate the costs of dumping the trash?</h3>

<p>Without loss of generality, Say the most efficient solution is to drop the trash into the sea.</p>

<p>If you are familiar with <a href="https://en.wikipedia.org/wiki/Externality" rel="nofollow">externalities</a> and the <a href="https://en.wikipedia.org/wiki/Coase_theorem" rel="nofollow">Coase Theorem</a>, you will believe that the obvious solution is to designate ownership: Under certain circumstances, if we allow someone to own "the sea", and then allow trading the sea, the person/coalition that "cares most" about the sea, given same initial endowments, will own it. If you want to trash the sea, you will have to pay them a fee, which depends on </p>

<ul>
<li>how important is it for you to get rid of the trash</li>
<li>how important is it for the owner to have a clean sea</li>
</ul>

<p>You can already see the <em>wlog</em> applying: You just assign ownership to all $n$ different trash-dumping possibilities, and look which owner asks for the lowest price. That will be the "most efficient place of dumping trash", from society's point of view. And the social costs of trashing that place are exactly the costs that the owner asks for (ignoring imperfect market structures).</p>

<p><em>However, you can already feel the big smelly but coming up.</em></p>

<h3>The free market's fundamental problem of evaluating the optimal value of finite resources</h3>

<p>But this is only true, if actors in the economy care about future generations as much <em>as they should</em>. Let me give a simple example. </p>

<p>In macroeconomics, we usually have a single representative agent, which lives for all eternity, and tries to maximize consumption. He does something like</p>

<p>$$ \max_{\{c_t\}_t} \sum_{t=0}^\infty \beta^tU(c_t)$$</p>

<p>Where $U$ is his utility function, $\beta$ is a discount factor (which we have assumed to be constant), and $c_t$ denotes consumption.</p>

<p>We then argue that <strong>the representative infinitively-lived agent model is equivalent to a model with finitely lived agents, that care about their children with some discount factor related to $\beta$</strong>. Intuitively, in the first model, you care about next period at rate $\beta$ because you are impatient and want things rather today than tomorrow. In the second model, you die in the next period. However, your child will be alive in the next period, and you care about it at rate $\beta$. Under these circumstances, these two models are identical (mathematicians like to say <em>isomorphic</em>).</p>

<p><strong>However</strong>, you can immediately see that there is no inherent reason why you should care about your own children at the same rate, as you care about your own future self. Even more importantly, there is no ex-ante normative reason why future generation's utility should be $\beta$ less important than the current generation's.</p>

<h3>tl;dr: While it is true that we can evaluate the de-facto social costs to common goods using the Coase Theorem, there is reason to believe that these de-facto social costs do not correspond to normative social costs.</h3>

CC BY-SA 3.0
2016-03-10T08:45:58.257Z
Thank you for explanation of the more fundamental economic problem of living in a society.
My concern was however more with the practicality of the matter. Let's say running a business while abiding with current regulations and doing such business in long term (that is, can't dump stuff such that it would damage someones property or endangered someones lives). What would be the costs per such disposal with recycling vs. other disposal methods.
Pavel Urubcik
CC BY-SA 3.0
2015-07-31T12:03:29.733Z
2015-07-31T12:03:29.733Z
FooBar
<p>Is recycling plastic, all things considered, efficient as compared to disposing of them and making new plastic?</p>

<p>I'm looking in efficiency rates in free market environment and also full process of production and disposal. No moral agenda, no subsidies, simply, is it worth to recycle plastic.</p>

<p>It is not easy task to find all the costs involved and it surely depends on place and politics so I understand some assumptions have to be set. I understand that keeping our backyard clean is also important so when disposal is considered it should be done in proper manner. No enforcement should be speculated (such as enforced sorting by the public), although voluntary action may be considered (motivated public).</p>

<p>The costs of production option of plastic should involve:
production (costs), introducing to the market (gain), disposal (costs)</p>

<p>The costs of recycling option of plastic should involve:
collecting (costs), processing (costs), reintroducing to the market (gain)</p>

<p>Anyone help is appreciated. It's not any project, just curiosity of my own. If anyone can at least point me to good resources and outline how to calculate everything objectively, I would much appreciate that.</p>

<p>One document that deals with the topic is here:
<a href="http://cdn.intechopen.com/pdfs-wm/37109.pdf" rel="nofollow">http://cdn.intechopen.com/pdfs-wm/37109.pdf</a></p>

<p>Although it doesn't give clear answer (hard numbers).</p>

<p>Update: What I seek here mostly is proper methodology of objective economic calculation of this very matter.
1. What are the partial processes to consider - the major contributor of costs/profits.
2. How to determine the costs/profits of each part.
3. Where to find objective data or how to get it.</p>

<p>I should have probably attempted to try something on my own, and I intend to. But once I start thinking about it I find that I either don't have objective output or that the calculation would require too much detail.
Example: landfill cost according to the EU document in comment, p.64 ( <a href="http://ec.europa.eu/environment/waste/studies/pdf/eucostwaste.pdf" rel="nofollow">http://ec.europa.eu/environment/waste/studies/pdf/eucostwaste.pdf</a> ) the prices range from 6 EUR/ton in Poland to 164 EUR/ton in Netherlands. Now, is the difference due to higher labor costs or due to taxes and directives?</p>

CC BY-SA 3.0
2015-07-29T12:30:08.060Z
I don't have an answer to your question but I wonder what you mean by 'disposal'. Is the dumping it in the sea legally proper disposal or do you include environmental costs? Also there are many different kinds of plastics, some of which cannot be recycled, so perhaps try to narrow down the question.
Giskard
CC BY-SA 3.0
2015-07-29T12:39:10.000Z
Let's assume we live in modern society and people have some threshold of what disposal they would tolerate. By disposal I meant convenient methods/costs of municipal waste disposal - landfill. So what does it costs to collect (from the public) and dump a ton of garbage/plastic?

I found on page 64 of this EU document, prices vary a lot for landfill, but the problem is that such prices include law enforcement which might be way beyond of what would be people willing to do if they were not forced. http://ec.europa.eu/environment/waste/studies/pdf/eucostwaste.pdf
Pavel Urubcik
<asset-pricing><environmental-economics><effective-price>
Effectiveness of recycling (consumer PET) plastic
Pavel Urubcik
# Effectiveness of recycling (consumer PET) plastic

(Asked by: username_0 on 2015-07-29)

Is recycling plastic, all things considered, efficient as compared to disposing of them and making new plastic?

I'm looking in efficiency rates in free market environment and also full process of production and disposal. No moral agenda, no subsidies, simply, is it worth to recycle plastic.

It is not easy task to find all the costs involved and it surely depends on place and politics so I understand some assumptions have to be set. I understand that keeping our backyard clean is also important so when disposal is considered it should be done in proper manner. No enforcement should be speculated (such as enforced sorting by the public), although voluntary action may be considered (motivated public).

The costs of production option of plastic should involve:
production (costs), introducing to the market (gain), disposal (costs)

The costs of recycling option of plastic should involve:
collecting (costs), processing (costs), reintroducing to the market (gain)

Anyone help is appreciated. It's not any project, just curiosity of my own. If anyone can at least point me to good resources and outline how to calculate everything objectively, I would much appreciate that.

One document that deals with the topic is here:
<http://cdn.intechopen.com/pdfs-wm/37109.pdf>

Although it doesn't give clear answer (hard numbers).

Update: What I seek here mostly is proper methodology of objective economic calculation of this very matter.
1. What are the partial processes to consider - the major contributor of costs/profits.
2. How to determine the costs/profits of each part.
3. Where to find objective data or how to get it.

I should have probably attempted to try something on my own, and I intend to. But once I start thinking about it I find that I either don't have objective output or that the calculation would require too much detail.
Example: landfill cost according to the EU document in comment, p.64 ( <http://ec.europa.eu/environment/waste/studies/pdf/eucostwaste.pdf> ) the prices range from 6 EUR/ton in Poland to 164 EUR/ton in Netherlands. Now, is the difference due to higher labor costs or due to taxes and directives?

**Tags:** asset-pricing, environmental-economics, effective-price
> **Comments:**
> **username_1**: I don't have an answer to your question but I wonder what you mean by 'disposal'. Is the dumping it in the sea legally proper disposal or do you include environmental costs? Also there are many different kinds of plastics, some of which cannot be recycled, so perhaps try to narrow down the question.  
> **username_0**: Let's assume we live in modern society and people have some threshold of what disposal they would tolerate. By disposal I meant convenient methods/costs of municipal waste disposal - landfill. So what does it costs to collect (from the public) and dump a ton of garbage/plastic?  I found on page 64 of this EU document, prices vary a lot for landfill, but the problem is that such prices include law enforcement which might be way beyond of what would be people willing to do if they were not forced. http://ec.europa.eu/environment/waste/studies/pdf/eucostwaste.pdf  

---

## 1 answers

### Answer by username_2 on 2015-07-31. Score: 2

I'm just going to answer one part of the question, the trickiest and most controversial one in my opinion:

> 2. How to determine the costs/profits of each part.

It sounds tricky: Even if you find the most efficient way of not-recycling trash (be it burning, dumping on a lake, on the moon, or in a third world country), how do you evaluate the *costs* of doing that?

### Coase: How can we evaluate the costs of dumping the trash?

Without loss of generality, Say the most efficient solution is to drop the trash into the sea.

If you are familiar with [externalities](https://en.wikipedia.org/wiki/Externality) and the [Coase Theorem](https://en.wikipedia.org/wiki/Coase_theorem), you will believe that the obvious solution is to designate ownership: Under certain circumstances, if we allow someone to own "the sea", and then allow trading the sea, the person/coalition that "cares most" about the sea, given same initial endowments, will own it. If you want to trash the sea, you will have to pay them a fee, which depends on

* how important is it for you to get rid of the trash
* how important is it for the owner to have a clean sea

You can already see the *wlog* applying: You just assign ownership to all $n$ different trash-dumping possibilities, and look which owner asks for the lowest price. That will be the "most efficient place of dumping trash", from society's point of view. And the social costs of trashing that place are exactly the costs that the owner asks for (ignoring imperfect market structures).

*However, you can already feel the big smelly but coming up.*

### The free market's fundamental problem of evaluating the optimal value of finite resources

But this is only true, if actors in the economy care about future generations as much *as they should*. Let me give a simple example.

In macroeconomics, we usually have a single representative agent, which lives for all eternity, and tries to maximize consumption. He does something like

$$ \max\_{\{c\_t\}\_t} \sum\_{t=0}^\infty \beta^tU(c\_t)$$

Where $U$ is his utility function, $\beta$ is a discount factor (which we have assumed to be constant), and $c\_t$ denotes consumption.

We then argue that **the representative infinitively-lived agent model is equivalent to a model with finitely lived agents, that care about their children with some discount factor related to $\beta$**. Intuitively, in the first model, you care about next period at rate $\beta$ because you are impatient and want things rather today than tomorrow. In the second model, you die in the next period. However, your child will be alive in the next period, and you care about it at rate $\beta$. Under these circumstances, these two models are identical (mathematicians like to say *isomorphic*).

**However**, you can immediately see that there is no inherent reason why you should care about your own children at the same rate, as you care about your own future self. Even more importantly, there is no ex-ante normative reason why future generation's utility should be $\beta$ less important than the current generation's.

### tl;dr: While it is true that we can evaluate the de-facto social costs to common goods using the Coase Theorem, there is reason to believe that these de-facto social costs do not correspond to normative social costs.

> **Comments:**
> **username_0**: Thank you for explanation of the more fundamental economic problem of living in a society. My concern was however more with the practicality of the matter. Let's say running a business while abiding with current regulations and doing such business in long term (that is, can't dump stuff such that it would damage someones property or endangered someones lives). What would be the costs per such disposal with recycling vs. other disposal methods.  

---

