Materials recycling has been practiced for thousands of years, but typically only when it has made economic sense to do so. Thomas J. Bruno mentions several cases in which recycled inputs have been heavily relied upon, not because of mandates, but because of demand for reuse or as inputs to various kinds of production. For example, the “rag trade” provided an important input to “new” clothing till about 1900, and the trade still exists today. Here’s Bruno on some other prominent examples:
“Steel is highly recycled already, with structural steel being 93% recycled. Currently, 97% of discarded automotive steel is used in new cars and other products. The market position for aluminum is also good; 75% of all aluminum ever produced is still in use today.”
Bruno’s key point is that recycling anything is a process that uses resources. It involves fixed costs of plant and variable costs for other inputs like water, energy, various chemicals, and labor. Thus, recycling makes economic sense and is efficient only when the private demand for recycled end-products justifies the costs of processing the used materials. Otherwise, on balance recycling is a waste of scarce resources.
Yet recycling enthusiasts and too many policymakers proceed under the misapprehension that recycling anything always makes sense! This is blind recycling! They approach the question with a certain religious fervor, rather than sharp pencils and the minds to wield them effectively. The resource costs are borne by local taxpayers, and they are not insignificant. These include the cost of additional facilities, running multiple trucks, and further sorting. If industrial buyers of these materials fail in their assessment of demand for goods with recycled content, then they bear the cost of any additional transport, processing, and disposal. Recycling shouldn’t salve the guilt that anyone associates with producing waste when, as is so often the case, nobody wants that shit! It ends up in the landfill and the effort to reuse ends up as waste as well. But still, the green public veneer of recycling programs remains in place.
Plastics recycling has proven to be perhaps the greatest disappointment to recycling enthusiasts. According to Bruno:
“Mechanical recycling involves grinding and remelting the plastic into a stream suitable for molding, but only a few types (out of thousands) of plastics can be so reprocessed. … Chemically recycling waste plastics has been an unmitigated disaster, resulting in product streams with far worse properties than virgin feedstocks.”
Those difficulties might be surmounted with improved technology or novel uses for plastic waste. Read this for an interesting discussion of using plastic in roads in place of bitumen for binding asphalt, or as modular panels in forming road base, but there is a long way to go before these are viable and economic alternatives.
Regulating products to require recycled content is just as harmful an intrusion as mandates on consumers and businesses to recycle used materials having little or no value. Predictably, it leads to degradations in quality and/or higher processing costs, with the ultimate burden shared by producers and users of end products. If it made economic sense, producers would already use more recycled inputs, but that is often out of the question. Mandates only bring more harm.
Despite constant handwringing in the media and among environmentalists, landfill capacity in the U.S. is adequate. Landfill space is priced based on scarcity, like any other resource. More landfill space will be brought on-line when market prices signal its profitability, despite the power of NIMBY-ism even in desolate lands. That usually can be overcome by compensatory arrangements. Landfills are far better managed and sealed today than in the past. Meanwhile, solid waste compression and techniques that speed the process of decomposition are stretching the capacity of existing landfills.
Once again, this is all a matter of economics. The value of avoiding the use of landfills via recycling is often just not there. Uneconomic recycling is simply a waste of scarce resources.
A few weeks ago I argued that raising living standards and eliminating poverty are human imperatives, and therefore growth is an imperative. Growth is a natural process for a free and creative people, and the alternative to growth is not zero growth. The coercion necessary to “achieve” a static economic environment would invariably lead to decline. It would be impossible to maintain average living standards while attempting a coerced leveling of those standards.
People have a notion, however, that it’s impossible to sustain growth due to the planet’s finite base of resources. If that is the case, we have available a mechanism to warn us as the time of hard limits approaches, which I’ll discuss below. So far, that signal hasn’t been activated. Moreover, the claim that growth is unsustainable can be challenged on several levels, which I’ll also address.
Effective Resources
First, a word about what I mean by the “accretion of resources”. The phrase refers to growth in the total effectiveness or productive potential of known resources given the rate of discovery and improvements in extraction and production technologies. Of course, if these discoveries and efficiencies are exceeded by current use, then there is no accretion, but depletion.
So let’s say we have a particular known stock of a resource we can readily draw on, so many pounds of resource X. In addition, we might know of the existence of another equally large quantity that can’t be readily drawn upon. Those are additional known (or proved) but undeveloped reserves. They might be difficult to exploit except at high cost, but we know they exist. We’d want to get on with the business of developing those reserves for extraction if they were needed any time soon, and we might want to begin prospecting for new reserves as well. As we’ve learned over the years. discoveries of previously unknown reserves of resources can be quite large. Prospectors are willing to bet that more resources exist, and they’ll undertake the risks of exploration if the potential rewards are adequate.
All of those concepts are straightforward. However, suppose we discover ways in which resource X can be used more efficiently, making things stronger or run longer or harder with less X. If we double the efficiency with which X is used, we have doubled the effective known reserves of X and, at least theoretically, unknown reserves as well. We’d have witnessed a doubling in the years that resource X can last. This is a form of resource accretion. Improvements in extraction or purification methods are also examples. Technological leaps like this, not to mention untold small increments in the efficiency of practices, have made economic growth possible in the past and will continue to do so in the future. Our effective resources seem to keep expanding. Accretion has occurred even with respect to resources like land as the world urbanized and the efficiency of farming advanced many-fold.
Growth In Real Time
Perceptions of growth are sometimes shaped by graphic depictions that some parties find alarming, so it might be helpful to take a quick look at some growth curves. First is an oldie-but-goodie chart showing GDP per capita taken from “Statistics on World Population, GDP, and Per Capital GDP, 1- 2008 AD” by Angus Maddison of the IMF:
This shows the explosion in the value of production that occurred during and after the industrial revolution, in contrast to very slow progress before that. The point I want to make here is how dramatic growth can look on a broad but visually compressed time scale. OMG! Look what we’ve done! How can we go on like this??? Often, the crux of the limits to growth argument is that such growth seems impossible assuming that we face fixed resource limits.
In fact, we experience growth in a very “local” way with respect to the passage of time. The two charts below illustrate a difference in perspectives using a hypothetically constant annual growth rate of 2.5%. The first chart shows 200 periods of growth, while the second expands only the last 20 periods of that time frame.
There is a great difference in the way the two vertical axes are scaled, which is important, but the second chart conveys that a respectable growth rate doesn’t really feel extreme when you’re in the middle of it, or, that is, in real time. It can look very extreme at the end of a long interval, depending on how severely the time axis is compressed. That’s not to discount the reality of much larger levels of activity (the vertical axes) and demands for resources as time goes on. However, those levels, and growth from those levels, is not at all alarming if our ability to achieve them has kept pace. So how can we know when we’re approaching a point at which resource limits will make it impossible to achieve those levels of activity? Market prices are the key signals, and they are the key to resource accretion.
Market Signals Light the Way
The market price is the best gauge of the scarcity of a resource. When resources become especially scarce, higher prices tell us so. That leads to conservation, which obviously extends the availability of those resources. Prices also function as an incentive for sellers to exploit new or harder-to-reach stores of a resource. That kind of resource accretion is one of the lessens the oil market has taught us again and again: oil exploration and known reserves tend to expand as the price rises, such that the prospect of oil depletion moves out to ever more distant horizons. There are certain minerals, elements, or isotopes (tritium?) that seem to be quite rare on Earth, but our ability to find them or extract them often improves with time. Space mining, which would vastly reduce the scarcity of resources like platinum, iron, nickel, cobalt, and many others, may become a reality in the near future. Interestingly, much of that activity could be in private hands. Space mining would lead to resource accretion on a whole new scale, and if we aspire to be a “grabby” civilization, it is a logical next step. So let’s go grab an asteroid!
When a price spikes due to greater scarcity, opportunities for substitution, exploration, and new efficiencies arise because the higher price justifies the cost of exploiting them. In addition to more difficult or costly extraction, a higher price encourages the use of close and even novel substitutes that may involve new technologies. In turn, that substitution reduces the relative scarcity of the original resource in question. And finally, back to conservation, users respond to price increases by finding their own innovative efficiencies in how a resource is utilized. The price response to scarcity is a channel through which much technological progress is encouraged.
While our earth-bound resources or even our star-system’s resources are finite, their effective quantity is highly flexible. Their potential at any time depends on our stage of discovery and the state of technology. Human ingenuity is a marvel at stretching the effective quantity of resources, and the greatest gains always occur when market forces are unleashed.
Thus, we see that prices, markets, and capitalism itself enable rational and sustainable responses to scarcity. Yet too often we hear claims that capitalism must be destroyed in order to save humanity. In fact, capitalism itself is the one system of social organization capable of achieving resource accretion, sustained growth, and lifting mankind from poverty. In fact, growth might well be an insurmountable problem without the dynamic energies of capitalism. Government planners are incapable of gathering and processing the vast information that markets process each and every day. Planners must substitute their own weak judgements, which prove flawed again and again.
Scarcity of the Commons
The environmental Left is quick to marshal a different kind of limits-to-growth argument. This one has to do with the scarcity of non-priced common resources and their overuse in production. For example, if a certain activity degrades the environment and those costs are not internalized by producers, they will tend to produce “too much”, leading to some degree of deterioration in human living conditions or the natural quality of the environment. In that case, we might not notice the limits to growth bearing down on us before corrective action is taken. Or so goes the theory that accumulating externalities lead to catastrophe. This is another front along which the limits to growth are asserted, particularly by climate alarmists and the environmental Left. Most prominently today, they contend that increases in atmospheric carbon concentration will lead to an unlivable warming of Earth’s climate.
Sense and Nonsense
The most glaring shortcoming of climate change advocacy is that the trends it decries are exaggerated. I’ve discussed the absurdly brief climate record cited by alarmists in several past posts (many of which appear here). We can start with the contention that carbon emissions are “poison”. In fact, carbon is life nourishing, as we’ve witnessed with the “greening” of the planet at current carbon concentrations of 4 parts per 10,000 of atmospheric gas. Furthermore, a longer historical temperature record using paleoclimate data shows that we are well within the range of past variation, even with the huge distortions to the record caused by urban heat islands and questionable downward adjustments to records of five to 15 decades ago.
The alarmist perspective is also inflamed by simplistic models of carbon forcing that ignore the impact of solar radiation, volcanic activity, and the behavior of aerosols in the atmosphere. Those models have consistently over-predicted temperature trends for decades. Equally troubling is that these models promote the fiction that mankind can control global temperatures by a little fiddling with a “carbon dial”, as if such fiddling could be accomplished without a massive centralization of political and economic power. The panicked narratives related to sea level increases and alleged increases in violent weather are equally flawed.
Growth Can Cure It
Another compelling response to climate arguments against growth is that technological advances have already enabled us to produce power without carbon emissions. Unfortunately, as a matter of public policy (regulation and bad choices by government industrial planners), we have increasingly failed to avail ourselves of these opportunities, instead choosing extremely wasteful methods of generating power. These are the windmill and solar “renewables”, which are resource-intensive, intermittent, low utilization, non-dispatchable, lacking storage for excess generation, intensive in land use (reversing prior accretions), and environmentally disastrous in fabrication, operation, and at disposal. Nuclear power is a far superior technology, especially with the advent of small, modular reactors and potential breakthroughs in fusion energy. These might help to rescue us from the spectacle of bone-headed industrial planning and greedy, renewable-energy rent seekers, but regulators have done seemingly all they can to prevent nuclear facilities from being built.
Just as human ingenuity is capable of expanding the exploitable stock of tradable, priced resources, it is also capable of inventing non-carbon power technologies that are more efficient and less environmentally destructive than ground-based solar and wind. Collection of non-intermittent solar energy in space arrays with wireless transmission to Earth is another promising alternative, as is geothermal energy. And carbon capture technologies show promise for neutralizing emissions or perhaps even reversing carbon concentrations one day, if that is deemed necessary. Much of this development work is in private hands, but barring drastic reductions in scale, the bulk of these efforts are (or will be) dependent on government funding.
It’s worth acknowledging here that resource accretion has a safety component in an expected value sense. Sometimes those risks can be internalized if risk reduction is of value to buyers. But the costs of “reasonable” risk mitigation cannot always be internalized without government action. For example, deflecting asteroid threats to the planet might be done best by private actors, but paying for that activity is a worthy application of public finance. The ability to deflect incoming asteroids is a noteworthy example of resource accretion via risk reduction.
Somehow, governments must be convinced to begin dedicating a larger share of the vast sums they spend on misguided climate interventions (including renewable technologies) to more sensible innovations. We might then benefit from accelerated breakthroughs that would settle not only our energy future, but a great deal of political strife as well. Like the market response to changes in scarcity, creative entrepreneurs will always step forward to compete for government funding. But if you pay them for crap, you’ll get a lot of crap!
Growth Once More
One day we might learn we are reaching the top of an s-curve. We aren’t there yet, if our ongoing accretion of resources is any guide, and there are new frontiers of space and technology to explore. The primary obstacles we face are not natural, but political and regulatory.
One area neglected above is the accretion of human capital. Certainly education is another way to expand our boundaries. However, population growth (and therefore labor force growth) tends to slow as living standards rise, and many argue that demographics have already become a drag on growth. A shrinking and aging population places a tremendous burden on young workers, making other sources of growth and productivity all the more critical. But new physical capital, resource development (including education), and new technologies can all continue to drive productivity and growth.
Growth depends on resource accretion, and there are many ways in which our effective stock of resources can be expanded. That includes enhancements in quantities, efficiencies, and safety. Private investment should be the primary avenue through which these are accomplished, which in turn requires flows of saving. Those flows are much more difficult to conjure without growth, so we have a chicken and egg cross-dependency. But chickens will lay eggs, just as saving and all kinds of investment will take place given the right incentives. Those would promote expansion in our effective stock of resources, improved adaptation to change, and enhanced well being. In the end, the rationale is simple: ending poverty requires growth.
Addendum: I just noticed that Don Boudreaux posted (and beautifully elaborated upon) this great Julian Simon quote:
“The quantity of a natural resource that might be available to us – and even more important the quantity of the services that can eventually be rendered to us by that natural resource – can never be known even in principle, just as the number of points in a one-inch line can never be counted even in principle.”
The Federal Reserve just announced tighter monetary policy in an attempt to reduce inflationary pressures. First, it raised its target range for the federal funds rate (on overnight loans between banks) by 0.5%. The new range is 0.75% – 1%. Second, on June 1, the Fed will begin taking steps to reduce the size of its $9 trillion portfolio of securities. These holdings were acquired during periods of so-called quantitative easing (QE) beginning in 2008, including dramatic expansions in 2020-21. A shorthand reference for this portfolio is simply the Fed’s “balance sheet”. It includes government debt the Fed has purchased as well as privately-issued mortgage-backed securities (MBS).
What Is This Balance Sheet You Speak Of?
Talk of the Fed’s balance sheet seems to mystify lots of people. During the 2008 financial crisis, the Fed began to inject liquidity into the economy by purchasing large amounts of assets to be held on its balance sheet. This was QE. It’s scope was unprecedented and a departure from the Fed’s pre-crisis reliance on interest rate targeting. QE had the effect of increasing bank reserves, which raised the possibility of excessive money supply growth. That’s when the Fed began to pay interest to banks on reserves, so they might be content to simply hold some of the reserves over and above what they are required to hold, rather than using all of that excess to support new loans and deposits (and thus money growth). However, that interest won’t stop banks from lending excess reserves if better opportunities present themselves.
The Fed has talked about reducing, “normalizing”, or “tapering” its balance sheet for some time, but it only recently stopped adding to it. With inflation raging and monetary policy widely viewed as too “dovish”, analysts expected the Fed to stop reinvesting proceeds from maturing securities, which amounts to about $95 billion per month. That would shrink or “taper” the balance sheet at a rate of about $1.1 trillion per year. Last week the Fed decided to cap the “runoff” at $47.5 billion per month for the first three months, deferring the $95 billion pace until September. Monetary policy “hawks” were disappointed by this announcement.
Monetizing Government
So, one might ask, what’s the big deal? Why must the Fed taper its securities holdings? Well, first, the rate of inflation is far above the Fed’s target range, and it’s far above the “average Joe’s” comfort range. Inflation imposes significant costs on the economy and acts as a regressive form of taxation, harming the poor disproportionately. To the extent that the Fed’s huge balance sheet (and the corresponding bank reserves) are supporting incremental money growth and fueling inflation, the balance sheet must be reduced.
In that connection, the Fed’s investment in government debt represents monetized federal debt. That means the Fed is essentially printing money to meet the Treasury’s financing needs. Together with profligate spending by the federal government, nothing could do more to convince investors that government debt will never be repaid via future budget surpluses. This dereliction of the government’s “full faith and credit”, and the open-armed acceptance of the inflation tax as a financing mechanism (à la Modern Monetary Theory), is the key driver of fiscal inflation. Reducing the balance sheet would represent de-monetization, which might help to restore faith in the Fed’s ability to push back against fiscal recklessness.
Buyer of First Resort
Perhaps just as critically, the Fed’s heavy investment in government debt and MBS represents an ongoing distortion to the pricing of financial assets and the allocation of capital. Some call this interference in the “price discovery process”. That’s because the Fed has represented a market-altering presence, a willing and inelastic buyer of government debt and MBS. Given that presence, it’s difficult for buyers and sellers to discern the true values of alternative uses of capital, or to care.
QE was, among other things, a welcome institutional development for the U.S. Treasury and for those who fancy that fresh money printing is an ever-valid form of government payment for scarce resources. The Fed’s involvement also means that other potential buyers of Treasury debt need not worry about interest rate risk, making public debt relatively more attractive than private debt. This is a dimension of the “crowding out” phenomenon, whereby the allocation of capital and flows of real resources between public and private uses are distorted.
The Fed’s presence as a buyer of MBS depresses mortgage rates and makes mortgage lending less risky for lenders and investors. As a result, it encourages an over-investment in housing and escalating home prices. This too distorts the allocation of capital and real resources, at the margin, toward housing and away from uses with greater underlying value.
Conclusion
The magnitude of the Fed’s balance sheet is an ongoing testament to an increasingly dominant role of central authorities in the economy. In this case, the Fed has served as a conduit for the inflation tax. In addition, it has unwittingly facilitated crowding out of private capital investment. The Fed’s purchases of MBS have distorted the incentives (and demand) for residential investment. These are subtle effects that the average citizen might not notice, just as one might not notice the early symptoms of a debilitating disease. The long-term consequences of the Fed’s QE activities, including the inflation tax and distorted allocations of capital, are all too typical of failures of government intervention and attempts at central planning. But don’t expect anyone at the Fed to admit it.
“Low prices say, ‘Take all you want, there’s plenty more.‘”
— Duke economist Michael Munger
See the prices marked on those shelves above? They say infinity!
Nothing drives economists crazy like anti-price “gouging” sentiment, and especially politicians who play on it. Hoarders hoard under such laws precisely because prices are too low given demand and supply conditions. Scarcity is defined by demand relative to supply, and freely adjusting prices register the degree of scarcity quite well. To what purpose? First, to ration available supplies; second, to encourage conservation; third, to incentivize producers to bring more product to market.
But when hoarders hoard, does that not create artificial scarcity? Not really, because the scarcity itself was already a condition, or else the hoarder would not have acted. And the hoarder would not have acted if developing conditions of scarcity had not been contradicted by the low price.
But what if the hoarders are mere speculators? Doesn’t that prove their actions create artificial scarcity? No, again, scarce conditions existed. Speculators don’t speculate to lose money, and they would certainly lose money if they buy when a product is not truly in short supply relative to demand. Speculators operate on the principle of arbitrage: transacting in response to profit opportunities created by gaps between prices and real value. Markets tend to eliminate such opportunities. Anti-“gouging” laws create them in times of crisis.
Should we demand that respiratory therapists not accept higher offers to practice in areas hit hard by the coronavirus? That bears a certain equivalence to laws preventing retailers from raising prices sufficiently to discourage hoarding. After all, retailers know that their dwindling inventory has gained value in a crisis situation, just as the respiratory therapist knows that her services have gained value in a world ravaged by a lung-damaging viral disease. Should we arrest her?
In a functioning market, the respiratory therapist, the retailer, and producers who supply the retailer would all earn more based on the true value of their skills, inventories, or ability to produce. These parties get to keep any premium they earn when conditions create more scarcity. Speculators however, generally don’t share their gains with the producer, which some find regrettable. (In fact, commodity speculators often provide valuable hedging opportunities for suppliers, so my last statement is not quite true.) Nevertheless, speculators serve a valuable function because they often provide the first source of information about changes in scarcity. That information, the price signal, has social value because it embeds incentives for conservation and added production.
Yes, retailers should be able to restock with some time. But it can fairly be said they did not react quickly enough to the “demand shock” caused by the range of precautions taken in response to the coronavirus pandemic. Perhaps retailers placed additional orders with suppliers in an effort to deal with the crisis, and some might have hiked certain prices marginally. I don’t know. However, it’s certain they were chastened in their price response by fears of damaging their public image, and even cowed by short-sighted laws and regulations in some cases. It doesn’t take much imagination, however, to think of ways they might have be able to deal with crisis conditions via pricing policy, such as charging quantity premiums: first package of TP at regular price, second at 2x regular price, three-plus at 10x regular price.
As J.D. Tucille says, people think of price “gouging” as a matter of degree. But at what threshold does price flexibility become inappropriate as conditions of scarcity change? No price controller can tell you exactly. That’s a good reason to eschew shortage-inducing pricing laws. Is it fair when prices rise drastically? Well, the price is infinite when the shelf is empty. Is that fair? Better let markets do their job.
Few weep for the wealthy when they are attacked by redistributionists, but perhaps we should. Recent expressions of hatred for the so-called super-rich extend to the merely affluent, of course, but billionaires are much less likely to find sympathy. Those proposing to “abolish billionaires” by laying public claim to their assets and incomes have little reason to expect a popular backlash. Nevertheless, there are strong reasons to defend the wealthy and their right to control the riches they accumulate. Don Boudreaux has some words we should all take to heart:
“While exceptions no doubt exist, the people who get rich in our economy are overwhelmingly people who have made the rest of us richer.”
Boudreaux is correct in noting that “anti-billionaire” sentiment is marked in people who know little of the complexities of actually producing things. Wealth creation is a two-way street. On one end is a cadre of innovators and risk-takers whose rewards are often concentrated. On the other end are the many beneficiaries of those innovations: eager buyers of value-enhanced products whose rewards are relatively diffuse but very meaningful nonetheless. The same dynamic takes place in generating lower levels of wealth, among hard-working small entrepreneurs and savers. Eliminate one set of rewards and the other will vanish.
Redistributionists are aware of scarcity at a basic level, but it’s as if they take for granted that a certain quantity of product will be on the shelves irrespective of the policy environment, incentives, and basic guarantees of economic liberty. As Boudreaux says:
“If food, clothing, medical care, automobiles, houses, diamond rings, airplane seats, rolls of paper towels, and all other good and services were randomly rained down onto earth by some heavenly being, it would then be true that the more of these goodies that I manage to grab, the fewer are the goodies available for you to grab, and vice versa. … And so if through simple luck or sinister cunning I grab more than you grab, then the resulting inequality in our wealth has no good justification. If the government seizes from me a chunk of ‘my’ stuff and gives it to you, no ethical offense is committed.”
That’s not how it works in a world in which effort and resourcefulness are required to satisfy wants. Under a truly liberal order, such efforts are voluntary, motivated by the promise and prospect of secure rewards. And so, as consumers, we can possess the riches made possible through the efforts of innovators and risk-takers. If successful, their rewards are earned by producing value that not only exceeds their own costs, but exceeds the prices buyers are asked to pay. Today’s most prominent billionaires have brought to market products, services, and ways of transacting that we’d never have imagined even a few years prior to their introduction. Computer operating systems, smart phones, on-line retailing, and room- and ride-sharing are just a few examples.
“The capitalist engine is first and last an engine of mass production which unavoidably also means production for the masses. . . . It is the cheap cloth, the cheap cotton and rayon fabric, boots, motorcars and so on that are the typical achievements of capitalist production, and not as a rule improvements that would mean much to the rich man. Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within reach of factory girls.”
Then there are the highly popular musicians and actors of the day, with wealth approaching (and in a few cases exceeding) $1 billion. Gillespie uses Paul McCartney as a case in point. Rather than “cheating” his way to wealth, McCartney’s fans would heartily agree that his talents are well worth the wealth he’s managed to accumulate. Would advocates of “abolishing” billionaires deny all this? They contend, in their own arbitrary judgment, that the market’s objective assessment cannot justify wealth of this magnitude.
Redistributionists also resent that anyone of wealth might have the gall to hold it or invest it rather than give it away. First, as noted above, secure rights provide the necessary incentives to create, produce, and take risks ex ante, which help enrich us all ex post. But those rights also must be secure ex post, and not subject to the whims of the next generation of socialist nitwits. In addition, as Gillespie says:
“Would there be less suffering in the world if [McCartney’s] money is expropriated and transferred to the wretched of the earth via higher taxes rather than through his own charitable donations and investments? Probably not, especially when you think about how much suffering, especially in the developing world, is the direct result of government action.”
Gillespie also marshals statistics on changes in measures of inequality that do not support the claims of redistributionists. In a separate post, Boudreaux makes that case here. Furthermore, the U.S. already has arguably the most progressive tax system in the developed world, even if transfers to the poor are not as generous as in some countries.
The sheer ignorance of many progressives is well illustrated by the “war against billionaires“. These critics of wealth demonstrate all the economic sophistication of preening high-school social studies students. Unfortunately, they are now coddled by certain established officeholders too eager to seek approval from the fringe left than to bother with responsible policy analysis.
It’s a short rhetorical step from condemning billionaires to condemning mere millionaires and sub-millionaires, and coveting their wealth. The victims here will ultimately include successful small business people and professionals who not only employ large segments of the population but also provide many of the services and wares we rely on in our day-to-day lives. Their success is not only well-earned: it is continuously exposed to risk from competitive forces. Rapacious politicians will never cease in their efforts to apply confiscatory taxes to the wealth of the very affluent. Soon enough, tax policy will reach farther down into the wealth distribution. These are games better suited to children or even vicious animals. Redistributionists think in zero-sum terms, with no appreciation for the positive-sum outcomes enabled by secure rights and free markets. Their failure to grasp the dynamics of free markets is at the root of their advocacy for disastrously negative-sum policies.
There are so many talented individuals in this world, people who can do many things well. In fact, they can probably do everything better than most other people in an absolute sense. In other words, they can produce more of everything at a given cost than most others. Yet amazingly, they still find it advantageous to trade with others. How can that be?
It is due to the law of comparative advantage, one of the most important lessons in economics. It’s why we specialize and trade with others for almost all of ours needs and wants, even if we are capable of doing all things better than them. Here’s a simple numerical example… don’t bail out on me (!):
Let’s say that you can produce either 1,000 bushels of barley or 500 bushels of hops in a year, or any combination of the two in those proportions. Each extra bushel of hops you produce involves the sacrifice of two bushels of barley.
Suppose that I can produce only 500 bushels of barley and 400 bushels of hops in a year, or any combination in those proportions. It costs me only 1.25 bushels of barley to produce an extra bushel of hops.
You can produce more hops than I can, but hops are costlier for you at the margin: 2 bushels of barley to get an extra bushel of hops, more than the 1.25 bushels it costs me.
That means you can probably obtain a better combination (for you) of barley and hops by specializing in barley and trading some of it to me for hops. You don’t have to do everything yourself. It’s just not in your self-interest even if you have an absolute advantage over me in everything!
This is not a coincidental outcome. Exploiting opportunities for trade with those who face lower marginal costs effectively increases our real income. In production, we tend to specialize — to do what we do — because we have a comparative advantage. We specialize because our costs are lower at the margin in those activities. And that’s also what motivates trade with others. That’s why nations should trade with others. And, as I mentioned about one week ago here, that’s why we have less to fear from automation than many assume.
Certain tasks will be automated as increasingly productive “robots” (or their equivalents) justify the costs of the resources required to produce and deploy them. This process will be accelerated to the extent that government makes it appear as if robots have a comparative advantage over humans via minimum wage laws and other labor market regulations. As a general rule, employment will be less vulnerable to automation if wages are flexible.
What if one day, as Elon Musk has asserted, robots can do everything better than us? Will humans have anywhere to work? Yes, if human labor is less costly at the margin. Once deployed, a robot in any application has other potential uses, and even a robot has just 24 hours in a day. Diverting a robot into another line of production involves the sacrifice of its original purpose. There will always be uses in which human labor is less costly at the margin, even with lower absolute productivity, than repurposing a robot or the resources needed to produce a new robot. That’s comparative advantage! That will be true for many of the familiar roles we have today, to say nothing of the unimagined new roles for humans that more advanced technology will bring.
Some have convinced themselves that a fully-automated economy will bring an end to scarcity itself. Were that to occur, there would be no tradeoffs except one kind: how you use your time (barring immortality). Superabundance would cause the prices of goods and services to fall to zero; real incomes would approach infinity. In fact, income as a concept would become meaningless. Of course, you will still be free to perform whatever “work” you enjoy, physical or mental, as long as you assign it a greater value than leisure at the margin.
Do I believe that superabundance is realistic? Not at all. To appreciate the contradictions inherent in the last paragraph, think only of the scarcity of talented human performers and their creativity. Perhaps people will actually enjoy watching other humans “perform” work. They always have! If the worker’s time has any other value (and it is scarce to them), what can they collect in return for their “performance”? Adulation and pure enjoyment of their “work”? Some other form of payment? Not everything can be free, even in an age of superabundance.
Scarcity will always exist to one extent or another as long as our wants are insatiable and our time is limited. As technology solves essential problems, we turn our attention to higher-order needs and desires, including various forms of risk reduction. These pursuits are likely to be increasingly resource intensive. For example, interplanetary or interstellar travel will be massively expensive, but they are viewed as desirable pursuits precisely because resources are, and will be, scarce. Discussions of the transition of civilizations across the Kardashev scale, from “Type 0” (today’s Earth) up to “Type III” civilizations, capable of harnessing the energy equivalent of the luminosity of its home galaxy, are fundamentally based on presumed efforts to overcome scarcity. Type III is a long way off, at best. The upshot of ongoing scarcity is that opportunity costs of lines of employment will remain positive for both robots and humans, and humans will often have a comparative advantage.
Machines have always been regarded with suspicion as a potential threat to the livelihood of workers. That is still the case, despite the demonstrated power of machines make life easier and goods cheaper. Today, the automation of jobs in manufacturing and even service jobs has raised new alarm about the future of human labor, and the prospect of a broad deployment of artificial intelligence (AI) has made the situation seem much scarier. Even the technologists of Silicon Valley have taken a keen interest in promoting policies like the Universal Basic Income (UBI) to cushion the loss of jobs they expect their inventions to precipitate. The UBI is an idea discussed in last Sunday’s post on Sacred Cow Chips. In addition to the reasons for rejecting that policy cited in that post, however, we should question the premise that automation and AI are unambiguously job killing.
The same stories of future joblessness have been told for over two centuries, and they have been wrong every time. The vulnerability in our popular psyche with respect to automation is four-fold: 1) the belief that we compete with machines, rather than collaborate with them; 2) our perpetual inability to anticipate the new and unforeseeable opportunities that arise as technology is deployed; 3) our tendency to undervalue new technologies for the freedoms they create for higher-order pursuits; and 4) the heavy discount we apply to the ability of workers and markets to anticipate and adjust to changes in market conditions.
“The argument that artificial intelligence will cause mass unemployment is as unpersuasive as the argument that threshing machines, machine tools, dishwashers or computers would cause mass unemployment. These technologies simply free people to do other things and fulfill other needs. And they make people more productive, which increases their ability to buy other forms of labour. ‘The bogeyman of automation consumes worrying capacity that should be saved for real problems,’ scoffed the economist Herbert Simon in the 1960s.“
As Ridley notes, the process of substituting capital for labor has been more or less continuous over the past 250 years, and there are now more jobs, and at far higher wages, than ever. Automation has generally involved replacement of strictly manual labor, but it has always required collaboration with human labor to one degree or another.
The tools and machines we use in performing all kinds of manual tasks become ever-more sophisticated, and while they change the human role in performing those tasks, the tasks themselves largely remain or are replaced by new, higher-order tasks. Will the combination of automation and AI change that? Will it make human labor obsolete? Call me an AI skeptic, but I do not believe it will have broad enough applicability to obviate a human role in the production of goods and services. We will perform tasks much better and faster, and AI will create new and more rewarding forms of human-machine collaboration.
Tyler Cowen believes that AI and automation will bring powerful benefits in the long run, but he raises the specter of a transition to widespread automation involving a lengthy period of high unemployment and depressed wages. Cowen points to a 70-year period for England, beginning in 1760, covering the start of the industrial revolution. He reports one estimate that real wages rose just 22% during this transition, and that gains in real wages were not sustained until the 1830s. Evidently, Cowen views more recent automation of factories as another stage of the “great stagnation” phenomenon he has emphasized. Some commenters on Cowen’s blog, Marginal Revolution, insist that estimates of real wages from the early stages of the industrial revolution are basically junk. Others note that the population of England doubled during that period, which likely depressed wages.
David Henderson does not buy into Cowans’ pessimism about transition costs. For one thing, a longer perspective on the industrial revolution would undoubtedly show that average growth in the income of workers was dismal or nonexistent prior to 1760. Henderson also notes that Cowen hedges his description of the evidence of wage stagnation during that era. It should also be mentioned the share of the U.S. work force engaged in agricultural production was 40% in 1900, but is only 2% today, and the rapid transition away from farm jobs in the first half of the 20th century did not itself lead to mass unemployment nor declining wages (HT: Russ Roberts). Cowen cites more recent data on stagnant median income, but Henderson warns that even recent inflation adjustments are fraught with difficulties, that average household size has changed, and that immigration, by adding households and bringing labor market competition, has had at least some depressing effect on the U.S. median wage.
Even positive long-run effects and a smooth transition in the aggregate won’t matter much to any individual whose job is easily automated. There is no doubt that some individuals will fall on hard times, and finding new work might require a lengthy search, accepting lower pay, or retraining. Can something be done to ease the transition? This point is addressed by Don Boudreaux in another context in “Transition Problems and Costs“. Specifically, Boudreaux’s post is about transitions made necessary by changing patterns of international trade, but his points are relevant to this discussion. Most fundamentally, we should not assume that the state must have a role in easing those transitions. We don’t reflexively call for aid when workers of a particular firm lose their jobs because a competitor captures a greater share of the market, nor when consumers decide they don’t like their product. In the end, these are private problems that can and should be solved privately. However, the state certainly should take a role in improving the function of markets such that unemployed resources are absorbed more readily:
“Getting rid of, or at least reducing, occupational licensing will certainly help laid-off workers transition to new jobs. Ditto for reducing taxes, regulations, and zoning restrictions – many of which discourage entrepreneurs from starting new firms and from expanding existing ones. While much ‘worker transitioning’ involves workers moving to where jobs are, much of it also involves – and could involve even more – businesses and jobs moving to where available workers are.“
Boudreaux also notes that workers should never be treated as passive victims. They are quite capable of acting on their own behalf. They often act out of risk avoidance to save their funds against the advent of a job loss, invest in retraining, and seek out new opportunities. There is no question, however, that many workers will need new skills in an economy shaped by increasing automation and AI. This article discusses some private initiatives that can help close the so-called “skills gap”.
Crucially, government should not accelerate the process of automation beyond its natural pace. That means markets and prices must be allowed to play their natural role in directing resources to their highest-valued uses. Unfortunately, government often interferes with that process by imposing employment regulations and wage controls — i.e., the minimum wage. Increasingly, we are seeing that many jobs performed by low-skilled workers can be automated, and the expense of automation becomes more worthwhile as the cost of labor is inflated to artificial levels by government mandate. That point was emphasized in a 2015 post on Sacred Cow Chips entitled “Automate No Job Before Its Time“.
Another past post on Sacred Cow Chips called “Robots and Tradeoffs” covered several ways in which we will adjust to a more automated economy, none of which will require the intrusive hand of government. One certainty is that humans will always value human service, even when a robot is more efficient, so there will be always be opportunities for work. There will also be ways in which humans can compete with machines (or collaborate more effectively) via human augmentation. Moreover, we should not discount the potential for the ownership of machines to become more widely dispersed over time, mitigating the feared impact of automation on the distribution of income. The diffusion of specific technologies become more widespread as their costs decline. That phenomenon has unfolded rapidly with wireless technology, particularly the hardware and software necessary to make productive use of the wireless internet. The same is likely to occur with 3-D printing and other advances. For example, robots are increasingly entering consumer markets, and there is no reason to believe that the same downward cost pressures won’t allow them to be used in home production or small-scale business applications. The ability to leverage technology will require learning, but web-enabled instruction is becoming increasingly accessible as well.
Can the ownership of productive technologies become sufficiently widespread to assure a broad distribution of rewards? It’s possible that cost reductions will allow that to happen, but broadening the ownership of capital might require new saving constructs as well. That might involve cooperative ownership of capital by associations of private parties engaged in diverse lines of business. Stable family structures can also play a role in promoting saving.
It is often said that automation and AI will mean an end to scarcity. If that were the case, the implications for labor would be beside the point. Why would anyone care about jobs in a world without want? Of course, work might be done purely for pleasure, but that would make “labor” economically indistinguishable from leisure. Reaching that point would mean a prolonged process of falling prices, lifting real wages on a pace matching increases in productivity. But in a world without scarcity, prices must be zero, and that will never happen. Human wants are unlimited and resources are finite. We’ll use resources more productively, but we will always find new wants. And if prices are positive, including the cost of capital, it is certain that demands for labor will remain.
The other day, a few colleagues were lamenting the incipient robot domination of the workplace. It is true that advances in automation and robotics are likely to displace workers in a variety of fields over the next few decades. However, the substitution of capital for labor is not a new phenomenon. It’s been happening since the start of the industrial age. At the same time, capital has been augmenting labor, making it more productive and freeing it up for higher-valued uses, many of which were previously unimagined. The large-scale addition of capital to the production process has succeeded in raising labor productivity dramatically, and labor income has soared as a consequence. That is likely to continue as increasingly sophisticated robots assume certain tasks entirely and collaborate with workers on others, even in the service sector.
Advanced forms of automation are another step in the progression of technology. The process itself, however, and the adoption of robotics, might well be hastened by public policy that pushes labor costs to levels not commensurate with productivity. I wrote about this process in “Automate No Job Before Its Time” on Sacred Cow Chips late last year. The point of that essay was that government-imposed wage floors create an incentive for automation. Because a wage floor has its impact at the bottom of the wage scale, at which workers are the least-skilled, this form of government intervention creates a regrettable and unnatural acceleration in the automation process. Other mandated benefits and workplace regulations can have similar effects.
Robert Samuelson makes the same points in “Our Robot Panic Is Overblown“. He notes the effectiveness of the U.S. economy in creating jobs over time in the presence of increasing capital-intensity. But he also warns of potential missteps, including the dangers of government activism:
“There are two dangers for the future. One is that the new jobs created by new technologies will require knowledge and skills that are in short supply, leaving unskilled workers without income and the economy with skill scarcities. … The second danger is that government will damage or destroy the job creation process. We live in a profit-making economic system. Government’s main role is to maintain the conditions that make hiring profitable. … If we make it too costly for private firms to hire (through high minimum wages, mandated costs and expensive regulations) — or too difficult to fire — guess what? They won’t hire. That’s what ought to worry us, not the specter of more robots.“
“Automation does indeed substitute for labor—as it is typically intended to do. However, automation also complements labor, raises output in ways that lead to higher demand for labor, and interacts with adjustments in labor supply. … journalists and even expert commentators tend to overstate the extent of machine substitution for human labor and ignore the strong complementarities between automation and labor that increase productivity, raise earnings, and augment demand for labor.“
As with almost all automation, robots will replace workers in the most routine tasks. Tasks involving less routine will not be as readily assumed by robots. To a large degree, people misunderstand the nature of automation in the workplace. The introduction of robots often requires collaboration with humans, but again, these humans must have more highly-developed skills than a typical line worker.
Hal Varian, who is the chief economist at Google, describes the positive implications of the ongoing trend to automate (see the link in the last paragraph of this post), namely, less drudgery and more leisure:
“If ‘displace more jobs’ means ‘eliminate dull, repetitive, and unpleasant work,’ the answer would be yes. How unhappy are you that your dishwasher has replaced washing dishes by hand, or your vacuum cleaner has replaced hand cleaning? My guess is this ‘job displacement’ has been very welcome, as will the ‘job displacement’ that will occur over the next 10 years. The work week has fallen from 70 hours a week to about 37 hours now, and I expect that it will continue to fall. This is a good thing. Everyone wants more jobs and less work. Robots of various forms will result in less work, but the conventional work week will decrease, so there will be the same number of jobs (adjusted for demographics, of course).“
An extreme version of the “robot domination” narrative is that one day in the not-too-distant future, human labor will be obsolete. Automation is not limited to repetitive or menial tasks by any means. A wide variety of jobs requiring advanced skills have the potential to be automated. Already, robots are performing certain tasks formerly done only by the likes of attorneys, surgeons, and computer programmers. Robots have the potential to repair each other, to self-replicate, to solve high-order analytical problems and to engage in self-improvement. With advances in artificial intelligence (AI), might humans one day become wholly obsolete for productive tasks? What does that portend for the future of so many human beings and their dependents who, heretofore, have relied only on their labor to earn a living?
There are any number of paths along which the evolution of technology, and its relationship to workers and consumers, might play out. The following paragraphs examine some of the details:
The Human Touch: There will probably always be consumers who prefer to transact with humans, as opposed machines. This might be limited to a subsegment of the population, and it might be limited to the manufacture of certain artisan goods, such as hand-rolled cigars, or certain services. Some of these services might require qualities that are more uniquely human, such as empathy, and the knowledge that one is dealing with a human would be paramount. This niche market might be willing to pay premium prices, much as consumers of organic foods are willing to pay an extra margin. However, it will be necessary to retain the perceived quality of the human touch and to remain reasonably competitive with automated alternatives on price.
Human Augmentation: Another path for the development of technology is the cyborgization of labor. This might seem rather distasteful to current sensibilities, but it’s a change that is probably inevitable. At least some will choose it. Here is an interesting definition offered by geir.org:
“Cyborgization is the enhancement of a biological being with mechanical or non-genetically delivered biological devices or capabilities. It includes organ or limb replacements, internal electronics, advanced nanomachines, and enhanced or additional capabilities, limbs, or senses.“
These types of modifications can make “enhanced” humans competitive with machines in all kinds of tasks. The development of these kinds of technologies is taking place within the context of rehabilitative medical care and even military technology, such as powerful exoskeletons, but the advances will make their way into normal civilian life. There is also development activity taking place among extreme hobbyists underground, such as “biohackers” who perform self-experimentation, embedding magnets or electronic chips in their bodies in attempts to develop a “sixth sense” or enhanced physical abilities. Even these informal efforts, while potentially risky to the biohackers themselves, might lead to changes that will benefit mankind, much like the many great garage tinkerers who have been important to innovation in the past.
Owning Machines: Ownership of capital will take on a greater role in providing for lifetime earnings. Can the distribution of capital ever be broadened to the extent needed to replace lost labor income? There are ways in which this can occur. The first thing to note is that the transition to a labor-free economy, were that to transpire, would play out over many years. Second, we have witnessed an impressive diffusion of advanced technologies in recent decades. Today, consumers across the income spectrum hold computers in their pockets that are more than the equivalent of the supercomputers that existed 50 years ago. Today’s little computers are far more useful in many ways, given wireless internet connectivity. There are many individuals for whom these devices are integral to earning an income. Thus, the rate of return on these machines can be quite impressive. The same is true of computers, software (sometimes viewed as capital) and printers, not to mention other “modern” contrivances with income-earning potential such as cars, trucks and a vast array of other tools and hardware. Machines with productive potential will continue to make their way into our lives, both as consumers and as individual producers. This also will include value-added production of goods at home, even for use or consumption within the household (think 3D printers, or backyard “farmbots”).
Saving Constructs: Most of the examples above involve machines that require some degree of human collaboration. Of course, even the act of consuming involves labor: I must lift the fork to my mouth for every bite! But in terms of earning income from machines, are there other ways in which ownership of capital can be broadened? The first answer is an old one: saving! But there is no way most individuals at the start of their “careers” can garner a significant share of income from capital. Other social arrangements are probably necessary. One of great importance is the family and family continuity. Many who have contemplated a zero-labor future imagine a world in which there are only two kinds of actors: individuals and the state. Stable families, however, hold the potential for accumulating capital over time to provide a flow of income for their members. Other forms of social organization can fill this role, but they must be able to accumulate capital endowments across generations. Of course, in an imagined world with minimal opportunities for labor, some have concluded that society must collectively provide a guaranteed income. To indulge that view for just a moment, a world of complete automation would almost certainly be a world of superabundance, so goods would be extremely cheap. That means a safety net could be provided at a very low cost. Nonetheless, it would be far preferable to do so by distributing a minimal number of shares of ownership in machines. These shares would have some value, and to improve resource allocation, it should be the individual’s responsibility to manage those shares.
Economic Transition: The dynamics of the transition to robot-dominated production raise some interesting economic questions. Should the advancement of robotics and artificial intelligence create a massive substitution away from labor, it will be spurred by 1) massive upward shifts in the productivity of capital relative to its cost; and 2) real wages that exceed labor’s marginal productivity. There will be stages of surging demand for the kinds of advanced labor skills that are complementary to robots. The demand for less advanced labor services does not have to fall to zero, however. There will be new opportunities that cannot be predicted today. Bidding for scarce capital resources and the flow of available saving will drive up capital costs, slowing the transition. And as long as materials, energy and replacement parts have a cost, and as long as savers demand a positive real return, there will be a margin along which it will be profitable to employ various forms of labor. But downward adjustment of real wages will be required. Government wage-floor policies must be abandoned. That will not be as difficult as it might sound: the kind of automation envisioned here would have profound effects on overall costs and the supply of goods, leading to deflation in the prices of consumables. As long as real factor prices can adjust, there will almost certainly remain a balance between the amounts of capital and labor employed.
In “Robots Are Nothing New“, Don Boudreaux passes along this comment from George Selgin:
“I’ve always been aghast at finding many otherwise intelligent economists arguing as if technology had a mind of its own, developing willy-nilly, or even perversely, in relation to the relative scarcity of available factors, including labor. Only thus can it happen that labor-saving technology develops to a point where labor, instead of being relatively scarce, becomes superabundant!
The fundamental problem, I believe, is confusion of the role of technological change with that of government interference with the pricing of labor services that is among the things to which technology in turn responds. Labor-saving technology becomes associated with unemployment, not because the last is a consequence of the former, but because both are contemporaneous consequences of a common cause, to wit: minimum wage laws and other such interference that sets wage rates above their market-clearing levels.“
There is much disagreement on the implications of automation. This excellent survey of experts by the Pew Research Center contains a number of insights. Also, visit Singularity Hub for a number of great articles on automation and AI, some of which are surprising. I believe that these technologies hold a great deal of promise for humanity. The process will not take place as suddenly as some fear, but ill-conceived policies such as a mandated “living wage” would put us on an unnaturally speedy trajectory. Opportunities for the least-skilled workers will be foreclosed too soon, before those individuals can develop skills and improve their odds of establishing a life free of dependency. Too rapid an adoption of advanced automation and AI would increase the likelihood of choosing suboptimal production methods that might be difficult to change later, and it would leave little time for education and training for workers who might otherwise leverage new technologies. The benefits of automation and their diffusion can be maximized by allowing advances to take a natural course, guided by market forces, with as little interference from government as possible.
Recycling is not wasteful when it makes economic sense to recycle, without government force brought to bear in the form of mandates, taxes or subsidies. The argument that private parties undertake recycling to a less-than-optimal extent is based on the notion that there are external benefits of recycling that go unrecognized. According to this line of thinking, government must mandate recycling and must tax or impose fees to provide recycling infrastructure. It must demand that producers of goods utilize a certain percentage of recycled materials. Children must be taught the sustainability, goodness, and sanctity of recycling. These positions are ill-founded and misdirect resources toward excessive, and yes, sometimes wasteful recycling.
In 2010, The Property and Environment Research Center (PERC) published an excellent paper by Daniel K. Benjamin entitled “Recycling Myths Revisited“. Benjamin begins by offering “a brief history of rubbish”, which recalls the great extent to which recycling efforts have always been made out of sheer self-interest. Scavenging is as old as civilization, and recycling efforts have generated inputs to production from the start of the industrial age. Some older recycling activities have become obsolete for various reasons; others have been spawned by new technology.
Benjamin’s history of rubbish recounts the history of landfill usage and development. He discusses one seminal event in the history of rubbish: the Mobro 4000 garbage barge from New York City. Rumors of hazardous waste aboard the Mobro led to it’s rejection at various rubbish “ports of call”. However, inaccurate reports circulated that the issue was a shortage of landfill space, a narrative that certain parties were only too happy to encourage, including the EPA and certain trade groups. The episode is a fascinating example of rumor, misinformation and manipulation.
“Although the physical availability of landfill space was not an issue, that was not how the situation played out in the press. The Mobro, said a reporter on a live TV feed from the barge itself, “really dramatizes the nationwide crisis we face with garbage disposal”. A strange cast of characters went on to turn Mobro’s miseries into a national cause. …
The result of this steady drumbeat of expressed concern was a growing fear that America was running out of places to put its garbage and that yesterday’s household trash could somehow become tomorrow’s toxic waste. By 1995, surveys revealed that Americans thought trash was the number one environmental problem, and 77 percent reported that increased recycling of household rubbish was the solution. Yet these claims and fears were based on errors and misinformation— myths of recycling.“
From there, Benjamin proceeds with an excellent discussion of eight recycling-related myths, which I attempt to summarize below:
We are running out of space for our trash: no, the capacity of landfills in the U.S. has outpaced growth in refuse for years. At 500 feet deep, a century’s worth of trash in the U.S. would fit into an area of five square miles. There is no shortage at all.
Trash threatens our health and ecosystem: actually, the EPA estimates that health dangers posed by landfills are close to zero. Older landfills sited on wetlands or containing any hazardous industrial waste are the only real threat, which has nothing to do with recycling today. Benjamin describes the superior design features of modern landfills.
Packaging is our problem: packaging “amounts to about 30 percent of what goes into landfills, down from 36 percent in 1970“. Thanks to innovations, the thickness and weight of almost every kind of packaging has declined significantly over the years. Moreover, packaging actually reduces waste in many instances by minimizing breakage and spoilage. For example, with packaging you deal with much less waste in your kitchen every time you buy chicken. The producer is able to recycle the useable waste more efficiently than you ever could.
Trade in trash is wasteful: no, trade in trash allows it to be placed where it costs the least, including dumping fees and transportation costs. Both parties to a trash transaction are likely to benefit, including those in areas that import trash by virtue of the local fees and taxes paid by landfills.
We are running out of resources: no we’re not, but it’s not that the total stock of earthbound resources is infinite (though many resources like forests are renewable). Instead, as Benjamin asserts, it’s that proven reserves of many resources keep growing, and the effective known stocks of nonrenewable resources are continually stretched by human ingenuity. Even land! Within a few decades, some resources are likely be mined on extraterrestrial bodies, but only if it makes economic sense. This is not to deny that scarcity is real, but prices in well-functioning markets always convey the degree of scarcity, the value of conservation, the cost of substitutes, the value of new exploration, and the value of new technological efficiencies. Right now, the world is awash in many commodities, and their prices reflect a relative lack of scarcity.
Recycling always protects the environment: this is nonsense. “Recycling is a manufacturing process, and therefore it too has an environmental impact. … over the past 25 years, a large body of literature devoted to life-cycle analyses of products from their birth to death has repeatedly found that recycling can increase pollution as well as decrease it (EPA 2006, 2010).” Benjamin notes that curbside recycling may well have a negative environmental impact due to the resource costs of the extra trucks, fuel, and exhaust required to collect it. The point is that tradeoffs exist and should not be ignored.
Recycling saves resources: not if the recycled material is inferior to virgin material, with attendant inefficiencies and lower-valued final products; not if the process absorbs more resources than it saves. These kinds of decisions are best left to rational market participants, for whom the question of recycling is a matter of self-interest. “Commercial and industrial recycling is a vibrant, profitable market that turns discards and scraps into marketable products. But collecting from consumers is far more costly, and it results in the collection of items that are far less valuable.” When low-value recycling is mandated or subsidized, the true cost of the activity is hidden.
Without recycling mandates, there wouldn’t be recycling: “Another force behind mandatory recycling is ignorance about the extent of recycling in the private sector. Private sector recycling is as old as trash itself. For as long as humans have been discarding rubbish, other humans have sifted through it for items of value. Indeed, … scavenging may well be the oldest profession.” Recycling must make economic sense. If it doesn’t, it simply should not happen.
Benjamin’s paper is loaded with great illustrations of all these points. Here’s one of my own: Some years ago, a local municipality was revealed to be sending recyclables to a landfill due to the low market value of the material. Net of the costs of sorting, selling and transporting the materials to buyers, it was apparently better to pay the fees for normal waste disposal. Residents were justifiably furious, but the reality is that recycled materials have a value that fluctuates. That value reflects the real resources the recycled materials can save, if any. However, the value may not always cover the variable cost of collecting the recyclables, let alone the fixed costs of the process. That’s to say nothing of the costs imposed on individuals by mandates.
The eight points above demonstrate that there is little in the way of external benefits from recycling. There is nothing mystical here to justify government coercion. Recycling must make economic sense and it must be voluntary. When we allow government to force the decision, the sure result is an overallocation of resources to an endeavor presumed by its adherents to save resources. There is no paradox. It’s just more waste.
“The Big Coffee Table Book of Doom” is an entertaining review of an actual coffee table book entitled “Overdevelopment Overpopulation Overshoot“, which appeals to the progressive Left’s neo-Malthusian mindset. I am almost tempted to buy this book for my coffee table as fodder for my own amusement, sort of like the board game “Class Struggle” I bought for laughs when I was in grad school. The review, written by Ron Bailey in Reason, pokes fun at the selection of photos in the book, which are chosen to reinforce such fables as over-population, climate change and the supposed evils of capitalism. Of course, this sort of nonsense will never die, primarily because people love a good scare story and because it aligns with the privileged Left’s sense of righteousness and noblesse oblige. Bailey highlights several actual trends that contradict the doomsday narrative:
“Agricultural productivity per acre is improving faster than the demand for food; as a result, fewer acres are needed to grow crops. These trends suggest that as much as 400 million hectares could be restored to nature by 2060, an area nearly double the size of the United States east of the Mississippi River.“
“… the total global fertility rate has fallen from over 5 children per woman in 1970 to 2.45 today, rapidly approaching the 2.1 rate that is the threshold of population stability.“
And on the “perils” of urbanization:
“Urban dwellers have greater access to education, market opportunities, and medicine, and they have fewer kids.“
As Kevin Williamson has pointed out, an egregious distortion of the neo-Malthusian perspective is an attitude that human beings are liabilities rather than assets. This is underscored by the recent comments of a UN official calling for depopulation as a serious objective. One wonders how she might propose to attain that objective. Can the eliminationists be far behind? In rebuttal to such thinking, Bailey quotes Ramez Naam, author of “Infinite Resource“:
“‘Would your life be better off if only half as many people had lived before you?’ In this thought experiment, you don’t get to pick which people are never born. Perhaps there would have been no Newton, Edison, or Pasteur, no Socrates, Shakespeare, or Jefferson. ‘Each additional idea is a gift to the future,’ Naam writes. ‘Each additional idea producer is a source of wealth for future generations.’ Fewer people means fewer new ideas about how to improve humanity’s lot and to further decouple our endeavors from the natural world. ‘If we fix our economic system and invest in the human capital of the poor,’ Naam writes, ‘then we should welcome every new person born as a source of betterment for our world and all of us on it.'”
Population growth has traditionally been a source of economic growth and enhanced welfare, and that is likely to remain the case. I do not claim that population growth will always be an imperative. Rather, fertility decisions are properly the business of families and individuals, not central authorities or public policy, which should take a neutral stance with respect to these decisions.
Malthusian doom is related to the economic law of scarcity, but it is not a direct implication of that law: scarcity means that resource availability is limited relative to potentially limitless demand. The law of scarcity does not assert that there are absolute limits to raw materials or production in the long run, only that human wants, if unrestrained, will always exceed available supplies. There are many ways in which supplies of resources increase over time. Exploration reveals new supplies and technology makes new supplies accessible at lower cost. More fundamentally, growth in the productivity of utilized resources causes effectiveeconomic supplies to grow. This is illustrated in Don Beaudreaux’s recent essay on the productivity of land (and see a follow-ups on the topic here):
“The economic supply of land, like that of any other resources you can name, is not a physical phenomenon. As long as people are free and inspired to innovate – and as long as input and output prices are free to adjust to changes in supply and demand – the economic supplies of even the most ‘fixed’ and ‘nonrenewable’ resources will expand.“
Prognostications of doom for humanity appeal to the ignorance of those with no perspective on the mechanisms by which well-being has improved in the developed world over the past few centuries. This has occurred largely by virtue of human ingenuity and free markets. The growth has also enabled greatly improved environmental conditions. The developing world will share in the prosperity only when those governments embrace real market liberalization.
In advanced civilizations the period loosely called Alexandrian is usually associated with flexible morals, perfunctory religion, populist standards and cosmopolitan tastes, feminism, exotic cults, and the rapid turnover of high and low fads---in short, a falling away (which is all that decadence means) from the strictness of traditional rules, embodied in character and inforced from within. -- Jacques Barzun
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