Bootleggers, Baptists, and Recyclers

Dr. Bruce Yandle of Clemson University (and my old co-worker at the Federal Trade Commission!) has a theory of regulatory reform he dubbed “bootleggers and Baptists.”  It cautions reformers not to expect arguments about cost, rationality, or actual bad consequences to have much effect in policy debates. He put it this way:

[W]hat do industry and labor want from the regulators? They want protection from competition, from technological change, and from losses that threaten profits and jobs. A carefully constructed regulation can accomplish all kinds of anticompetitive goals of this sort, while giving the citizenry the impression that the only goal is to serve the public interest.

Indeed, the pages of history are full of episodes best explained by a theory of regulation I call “bootleggers and Baptists.” Bootleggers, you will remember, support Sunday closing laws that shut down all the local bars and liquor stores. Baptists support the same laws and lobby vigorously for them. Both parties gain, while the regulators are content because the law is easy to administer. Of course, this theory is not new. In a democratic society, economic forces will always play through the political mechanism in ways determined by the voting mechanism employed. Politicians need resources in order to get elected. Selected members of the public can gain resources through the political process, and highly organized groups can do that quite handily. The most successful ventures of this sort occur where there is an overarching public concern to be addressed (like the problem of alcohol) whose “solution” allows resources to be distributed from the public purse to particular groups or from one group to another (as from bartenders to bootleggers).

At first blush, of course, this “alliance” appears bizarre.  Baptists sought morality, upright living, and service to the church, community, and nation.  Bootleggers were tough, large-scale capitalists, happy to break the law if it increased their profits.

Yandle’s observation (and he was in this, as in all things, entirely correct) was that if you are trying to reform a regulation that appears obviously wrong from an economic perspective, it may be harder than you think.  The reason is that the regulation has created a set of economic interests that benefit from the status quo, and is supported by a set of (apparently distinct) moral arguments that may have nothing to do with economic consequences.

Which brings us to recycling. We see a coalition that depends on a large, fervent band of activists, bent on saving the world through the environmental version of upright living and service to the community.  They are the Baptists.  And their allies are the enormous corporations and powerful moneyed interests that make up the recycling-industrial complex.  They may not break the law, but they are happy to lobby for changes in the law that improve their profits and corporate bottom line.  When you think about it, in fact, the alternative to curbside recycling is bottle deposits and other kinds of packaging restrictions.  Why do we recycle, rather than use these other policies?  A pretty good academic case can be made that the answer is “Because the beverage companies prefer recycling, because then they don’t have to pay the costs of packaging!”  (http://conversableeconomist.blogspot.com/2012/11/was-curbside-recycling-invention-of.html)  To put it bluntly:  are advocates of curbside consumer recycling good stewards of the environment, or are they just dupes of powerful corporate interests?

Wolves in Green Clothing

Clearly, that’s a bit over the top.  And, like most analogies, the “Baptist-bootlegger” analysis is itself inexact.  Bootleggers presumably did not believe in temperance, and were just cynically using the Baptists for moral cover.  Many, and probably almost all, of the folks who work for companies and organizations in the recycling-industrial complex genuinely believe they are doing something important for the environment.

The problem is that in many cases, they are objectively, empirically wrong.  If we actually cared about resources and the environment, we would be better off immediately eliminating all mandatory recycling programs nationwide.  We waste more energy, and cause more pollution, by trying to recycle than we would if we abandoned these programs and let market forces pull what is valuable from the waste stream.  In mandating public recycling, we have had to extend regulations to prevent private recycling.  More and more cities (including New York: http://www.nytimes.com/2007/10/15/nyregion/15recycle.html  )  actually prosecute private companies that “steal” material for the purpose of recycling it!  The reason is that these craven thieves are taking the material that should be recycled, and leaving behind the garbage.

Recycling companies and contractors that work with local governments are doing something quite different.  Their goal is not to save resources, but rather to make money.  Their chief source of income—and profit—is not the sale of recycled materials.  Rather, it is subsidies from taxpayers.  If the subsidies ended, so would most of the enviro-bootleggers’ profits.  That’s why the aid of the enviro-Baptists is crucial:  the question is transformed from an economic question—where consumer-level mandatory recycling makes no sense—to a moral question—where it is the consumers themselves clamoring to pay extra for the chance to go to church.

By portraying themselves as serving the environment, these corporate wolves in green clothing are able to secure huge profits, protected from competition by exclusive contracts.  The largest companies, such as Waste Management and Industrial Services of America, are sophisticated rent-seekers, with a comprehensive strategy for lobbying for new subsidies, expanded programs of recycling, and increasing the number of products diverted from the waste stream.  Of course, since these are private for-profit companies, their goal is not to save money, but to make money.

Any attempt to reform the system will run into just the problems that Yandle points out.  If you explain the economic inefficiencies, the moral wing of the coalition will smite you:  “Don’t you care about the environment?”  And if you show that post-consumer retail mandatory recycling is actually bad for the environment, the smooth corporate lobbyists of the economic wing will cite figures that show that recycling creates jobs and employs people in local communities.  This new version of the Broken Window fallacy (http://bastiat.org/en/twisatwins.html) actually goes so far as to claim that after you break the window, you should recycle the glass!

Replies to Participants

Finally, a brief answer to the three excellent Response Essays posted on this site.

Edward Humes:  We have an empirical disagreement, but it is a minor one.  The question is which is the exception and which is the general rule:  As I see it, the general rule is that we recycle far too much of the waste stream, because we use moral imperatives rather than economic logic.  There are exceptions, because some kinds of resources should be recycled, in terms of their value and the savings they imply in terms of conserving energy required to make products from virgin materials.

But those exceptions should not be taken to disprove the general rule that mandatory—as opposed to voluntary private—recycling is an enormous waste of resources.  The reasons that this would be a mistake are outlined above, but they are worth repeating.  If mandatory recycling were ended, a substantial number of private processes for capturing the small portion of the waste stream that is actually valuable would spring up immediately.  We don’t have those now because (1) public recycling is subsidized, driving private recycling out of the market, and (2) when private recycling is attempted, it is banned or even prosecuted as a violation of the law.  As it stands, since private recycling is criminalized, only criminals can recycle privately.  So saying that recycling is efficient is disingenuous.  Of course recycling, as a general matter, is efficient.  The question is whether mandatory recycling of materials that are not economically viable is efficient.  The answer to that question is no.  And yet we do a lot of it.

Melissa Walsh Innes:  Well, it depends what you mean by “demand” and what you mean by “recycled.”  I have a substantial demand for Melissa Walsh Innes to come do yard work at my house.  The grass is tall, there are weeds everywhere, and I need some oak trees taken out and the wood split so it can season in time for next winter’s fireplace season.  Why doesn’t this happen?  (1)  It’s too expensive to pay her to do it.  Still, I would really be glad if she would do it, for free.  (2) Suppose I would pay her expenses and the value of her time (as a yard worker) to come do this work.  She still wouldn’t do it.  Her time is worth far more as an analyst and advocate for sensible environmental policies.  The opportunity cost of the resource—her time—is far too high to waste it on doing yard work at my house, even though I have a really high “demand” for her to come do that, if only she would do it for free.

The point is that firms’ “demand” for recyclables is a lot like my demand for Melissa to come do yard work at my house.  These companies would in fact appreciate it if someone would wash the material, sort it, and deliver it to their door in a form where it can be used cheaply and efficiently, as long as they will do it for nothing, or at taxpayer expense.  But the companies cannot afford to pay for it, because (1) it’s too expensive to pay citizens to work as garbage collectors and (2) even if they did pay, the opportunity cost of the time spent sorting, and the resources spent washing and transporting the garbage is too high.

As for “recycled,” here is a fun game you can play at home:  when someone says “Everything that can be recycled, should be recycled,” ask them a question.  “What do you mean by recycled?”  It turns out they have no idea.  They will sometimes just mumble and say, “You know… RECYCLED!” as if that is an answer.

The actual answer is usually just, “It was diverted from the landfill.”  But where does it go?

  • We recycle plastic by shredding it and using it as a fiber.  Or by burning it, recapturing no more than 15% of its energy potential.  It would be better to bury it, so in the future it could be strip mined when it is actually more valuable. 
  • We recycle glass by grinding it and using it as fill in asphalt or other road building material. 
  • We recycle paper by shredding it and using it to make mulch.  It is extremely rare for “recycling” to mean anything like “return the material to remake the original plastic or glass container, saving virgin materials,” or “return to the paper factory, to be used to make actual paper, saving trees.”

Actual recycling happens sometimes, and (to be fair to Melissa) it happens a lot at industrial or commercial scale.  Large quantities of homogenous, clean plastic, glass, or paper (especially newsprint or corrugated) really are valuable.  So, large scale recycling—which is what she is actually talking about—is viable now.  And it is happening now, because it saves money and resources. My complaint is with involuntary, retail scale, consumer recycling, particularly of glass.  By and large, that kind of post-consumer recycling is a net waste of resources, if you account for sorting, cleaning, and transporting.  And the stuff doesn’t get recycled at all, but is just diverted from the landfill and disposed of, at great expense, somewhere else.  Because we have fetishized landfills to have a value far above their actual economic cost.

Steven E. Landsburg:  Steve suggests that we should not cast recycling as a moral issue.  That’s like saying that dogs shouldn’t eat out of the garbage.  It may be true, in some sense (I certainly agree!), but it is the nature of dogs to eat out of the garbage (Wait!  Isn’t that recycling?  Garbage that’s eaten is diverted from landfills, right?) 

It is the nature of rent-seeking industries to convert consequentialist claims that are economic losers into moral claims that are political winners.  The important insight that Yandle had about Baptists and bootleggers is that these policy coalitions exist for a reason.  The symbiosis between the moral argument and the practical argument is fundamental to the way that politics works.  And recycling is a political issue, not an economic one.

Also from This Issue

Editorial Note

Lead Essay

  • Recycling: Can It Be Wrong, When It Feels So Right? by Michael C. Munger

    Michael C. Munger begins with the assertion that almost everything that’s said about recycling is wrong. Zero waste isn’t a good policy goal. Some things really do belong in the landfill. But which ones are they, and why? Munger offers a tour of the economics of trash burning, trash collection, landfill subsidies, and mandatory recycling. Along the way, he points out some of the irrational behaviors that flow from the “always recycle” message – irrational even when our highest priority is saving the environment.

Response Essays

  • Recycling: Why Better Than Nothing Isn’t Good Enough by Edward Humes

    Edward Humes argues that recycling is indeed economically efficient, and that pointing to occasional exceptions does not disprove the general rule. Still, he argues that recycling should be the last line of defense in our solid waste management strategy: Reductions in packaging, better incentives, and “pay as you throw” trash collection can all help solve the problem long before the recycling bin.

  • Changing Government’s Role in Recycling by Melissa Walsh Innes

    Melissa Walsh Innes argues in favor of “extended producer responsibility”—a public policy approach to solid waste that would assign landfill and other disposal costs to producers, not taxpayers. If this were done, corporations would seek out more efficient packaging, more comprehensive recycling methods, and other ways to economize on their use of disposal resources. Consumers would bear the costs in more expensive products, but only if they purchased the products in question. Consumers’ choices would drive producers to make market-based decisions that internalize and/or eliminate the externalities in question. Taxpayers would pay nothing extra, a key difference from many existing recycling programs.

  • Don’t Cast Recycling as a Moral Issue by Steven E. Landsburg

    Steven E. Landsburg argues that promoting recycling as a moral issue has a sinister cost: It encourages the public to view policy questions moralistically. When they do, they lose sight of tradeoffs, and the ability to compromise deserts them. If we absolutely must preach a morality, he says, let us preach the morality of respecting price signals. These will usually tell us when actions are efficient or inefficient. In short, we should encourage an ethos of respect for voluntary market outcomes.

The Conversation