There are three things you can do with your container after you consume the contents -- put it into the garbage can for an eventual trip to the landfill, recycle, or dispose of it illegally. As a point of departure, suppose that anti-litter laws are perfectly enforced such that the third possibility is not a viable option. The government is left with two policy instruments to incentivize your remaining choice -- the price of garbage disposal and a tax/subsidy scheme to encourage recycling.
Under our assumption of perfect enforcement, efficiency demands charging households and businesses for garbage disposal according to the costs thereof, including the social costs of using scarce landfill space and abiding by appropriate environmental controls. Under these assumptions, individuals and private recycling firms will have exactly the right incentives. Recycling will be carried out to the extent that it is socially desirable – no more, no less.
In contrast, the current City and County policy is to finance garbage collection out of general revenues. This results in two problems. First, by failing to charge for incremental disposal, government policy in effect subsidizes disposal and wastes scarce landfill capacity and other disposal resources. Second, because consumers are not charged for throwing containers and other recyclable materials away, the amount of recycling that occurs is less than what is socially efficient.
Suppose, for some unknown reason, that we are stuck with the policy of under-pricing trash collection. Limiting our attention to disposable containers, it would be efficient to charge a trash-collection/landfill user-fee per bottle or can.
This is the best case that can be made to support the current six-cent "deposit." But the revenue thereby collected should be used to subsidize private recycling. This leaves important decisions regarding standards, location of redemption centers, and whether machines or people should collect the cans in the hands of those who have the best information about costs. Setting up a new government bureaucracy to make these decisions is an invitation to waste.
In summary, what went wrong with the State’s "Bottle Bill?" First, the State is trying to stop the bleeding with a band-aid without taking out the bullet. If trash-collection were efficiently managed and priced, there would not be a problem to solve. Second, the state is gearing up to waste much of the six cents per container and more, inasmuch as State employees will be tasked to administer the program.
Finally, we need to relax our original assumption of perfect anti-litter enforcement. There are two ways to go. The first would be to deliberately under-price collection to make it less tempting to litter. The under-pricing of trash collection, in turn, makes it "second-best" efficient to institute a tax/subsidy program to encourage recycling. This is an awful lot to ask of government. Not only must they administer the deposit/recycling program effectively, but they must possess a level of omniscience with which we only expect our Creator to be endowed. And they must be stoically resistant to political pressure.
A more promising path would involve privatizing trash collection. For example, in St. Paul, Minnesota, households are required to have a contract with a private trash collector to collect trash at least once a week. The government doesn’t have to set the price. Competitive markets do that.
The private service provider knows the cost of pickup, transportation, use of the dumpsite, environmental regulation, and the probability of being sued or otherwise penalized if they fail to comply with environmental law. If the government wants the providers to charge less, they can subsidize them accordingly. (Note, however, that privatization lowers the cost of the service. For example, private trash collection costs $11/month in St. Paul, compared to the cost to Hawaii taxpayers of $24/month; Slater http://lava.net/cslater/privatize8.htm
So instead of creating a black hole of interrelated problems and taxpayer costs, we should start by privatizing trash collection. This already incentivizes private recycling because households are required to pay the incremental cost of sending the container to the landfill instead of recycling it. Government can strengthen these incentives by vigorous enforcement of anti-litter laws. If they want to tinker with small subsidies to private recycling firms funded by small user-charges, that would do little harm and might bring about an improvement. Taxing consumers to set up a government bureaucracy and imposing recycling mandates, however, is a lose-lose proposition.
James Roumasset is a professor of economics at the University of Hawaii and serves on the board of scholars of the Grassroot Institute of Hawaii. He can be reached via email at: mailto:jimr@hawaii.edu
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