TCS Daily

Waste Not, Want Not?

By Tim Worstall - December 15, 2004 12:00 AM

Sometimes it's government itself which is the problem, not the solution. Not all that surprising a thought for us right-thinking types but it does seem to need explaining again and again to get the message through to the rest. Much of what modern governments do is simply flailing around, trying to undo the distortions and errors they introduced themselves in the previous round of legislation and, what is worse, doing so in the most inefficient manner possible, making that very problem being addressed even worse.

Today's example comes from the UK where we are at that time of year when the legislative program is pelt out for the coming Parliamentary session.

"Margaret Beckett, the Environment Secretary, said: 'People want to live in communities that are not blighted by litter, graffiti and fly posters and we should not have to tolerate the anti-social behavior that leads to abandoned, burnt-out cars.' But waste experts say the Government is still a long way from controlling the problem of abandoned cars, caused by the falling price of scrap and the cost of complying with EU environmental legislation." [The Telegraph]

Those waste experts are employing a form of language called understatement, one of the British vices, for the problem itself has been entirely caused by the State interfering in an efficient market. There might even be good reasons for them to interfere in that market, there being externalities that could be identified, it being the manner of their intervention that was so absurd...for they entirely ignored our first law of economics, that incentives matter.

If we go back a decade or so we find that when an individual dropped off their old clunker (known in the jargon as an end of life vehicle, no, not a synonym for a hearse) at the scrap yard they were rewarded with a small sum, something in the $50 - $100 range. This was because the materials in the car were of value. The steel itself, the aluminum perhaps in the engine head, radiator scrap is such a well known item that industry magazines quote it as a separate item. Catalytic converters are a class all of their own, each half kilo ceramic brick inside being worth $10 or so dependent upon the platinum and palladium prices and a car can have from one to eight of them. So what our scrappie would do is sort through the components of the car, remove the higher value items and then, just as in those movie scenes where the hero is tied up in the trunk, crush the car and send it off to a steel mill.

As we have all got environmentally perfect this system was judged to be not good enough, and this is where our possible externalities come in. Engine oil and anti-freeze might simply be dumped, things like the seats and their stuffings, plastics and so on should be removed and disposed of separately. Your mileage on such matters may vary but let us just assume that these new rules are indeed a valid addition to the list we use in making our planet a cleaner and happier place. A suitable place for governmental regulation even.

This extra work required, the need for landfill space for our newly defined hazardous waste has meant that far from being rewarded with a token sum when dropping off one of the said clunkers, one has to provide the scrap yard with $50-$100. It doesn't take an IQ of genius level to see what happens now. Fewer people drop their cars off to be recycled and more abandon them on the streets:

"Today's Northern Echo offers a story headed: 'Abandoned vehicles continue to increase', in which it lists some of the areas in the North East that are affected by this new epidemic.

Chester-le-Street registered a 400 per cent increase in the number of vehicles abandoned last year. Derwentshire, a neighbouring council, registered a 148.3 per cent rise. Hartlepool recorded a 164.4 per cent rise, Middlesbrough 96 per cent and Richmondshire 157.6 percent. Sedgefield, in County Durham, recorded an 11.1 percent rise, while Stockton recorded a 378 per cent rise. "

Homer Simpson's phrase comes to mind here, well "Doh". Move from a system where people earn money for dropping off something to where they have to pay to do so and, amazingly, fewer people will drop said item off. The problem does not stop there of course, ooh, no, we have not quite managed to plumb the depths of the statist's ignorance. For further new rules came in just a few months ago, severely restricting the number of sites where that hazardous waste could be landfilled. More, if one inadvertently put hazardous waste in a site for non-hazardous waste, one could be fined. Well, fair enough one might say. Yet if one put non- into a hazardous waste site one can also be fined, leading to the rather absurd situation that providing too much care and attention to the environment is a criminal act. This led to warnings:

"The scrap metal industry said it would no longer accept the 45,000 cars and tens of thousands of domestic appliances it deals with each week. For months it has been asking the Environment Agency to decide whether such routine scrap is classed as toxic waste, but without success. Now, it says, abandoned cars will have to remain on the streets."

As yet we do not have the details of exactly what Ms. Beckett proposes to do about all this but on past evidence it will be to increase the fines upon those who do not deliver their cars up along with the check for the approved sum. As pointed out at the top, this is simply new legislation to repair the damage done by earlier such.

I have assumed that the change in how cars are recycled has merit, is not be an absurd over-reaction to minor amounts of pollution. Continuing to do so, can we develop or design a system which would work better? Quite obviously it would be difficult to design one that worked worse but here's the result of a modicum of thought. We wish to encourage recycling of cars in a particular manner. This rather pre-supposes that people will deliver them up to be recycled in that manner. We therefore need to make the incentives push people towards doing so. We also know, from our past experience, the sums of money necessary to encourage that behavior, some $50-$100 per car. Wonderful, let us therefore pay people that sum when they deliver a car to be scrapped. Simple eh?

We could fund it in any number of ways. Perhaps from local taxation as the local councils would probably much rather pay that than the $700 it costs them to clear up the abandoned wrecks. Or perhaps from general taxation, or a levy on the sale of new cars, a smaller levy on a car as it changes hands....there are multiple ways the money could be raised.

Such simplicity has little chance in the real world I'm afraid, for there would be a secondary benefit to such schemes. As ever greater standards are demanded, the tax or impost to fund them would rise and we might even reach the point where people started to question these economic costs. Is the pollution caused by an old car really worth paying $50 to prevent? $100? $500? At some point the general public will say no, and as we know, this cannot be allowed to happen. For pollution is not, as we might think, simply one of those economic choices that have to be made, a part and parcel of life itself, it is evil and as such has no part in our Brave New World. Much better to fine those who refuse to obey, none of this silly economic rationality for us, for evil must be punished.


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