The first rule in understanding recycling is to remember that nothing has been recycled until it leaves the solid waste stream and comes back to final users as another product. That includes not only aluminum cans which can be turned in to other aluminum products; paper, which can be used to make paper as well a cattle bedding; tin cans which, after de-tinning, can be used as scrap in metal fabricating; glass, which can be used to make glass or road-construction aggregate; plastic which can be used to make products ranging from certain forms of packaging, to fence posts and wood-substitute building materials; but also grass clippings and food waste which can, theoretically, be composted to yield a material which may be used to enrich the soil.

Encouraging households and commercial establishments to separate one thing from another in their waste is not recycling. It is something called "source separation". Taking source-separated materials to a neighborhood recycling center, whether publicly or privately operated; moving unseparated garbage to a place where source separation can occur (commonly called a "Materials Recovery Facility"); or even offering curb-side pick-up of source-separated materials placed in special bins provided by private or government waste haulers are not recycling (emphasis intended). Only when something which has been removed from the solid waste stream is brought back as another product can recycling be said to have occurred. That is the definition of recycling I will use throughout this section.

Clearly, however, source separation has to be the first step in the MSW recycling process. After that has been done – and doing it will absorb scarce economic resources and, thereby, incur costs – one can really begin to talk about the possibility of something coming back as a "recycled" product.

There is nothing new about recycling. Indeed, William Rathje argues, there is nothing new about any of the proposals which are now being offered as the solution to the MSW "crisis." [66] Some forty years ago, as this writer sat in the family car at a railroad crossing with his parents and a family friend, the friend watched as one railroad car after the other passed before our eyes. "They're sending it to Japan so that the Japanese can make guns to kill us", he said. I was taken back. My parents were not. This man had spent more than three years in a Japanese prisoner-of-war camp following his capture at Battan. All those railroad cars were filled with scrap metal on its way to some point where it would be turned into various and sundry metal products.

That was recycling then, and it's recycling now. Indeed, the many American steel mini-mills which have created so much competition for the larger fully-integrated steel firms have done so by using scrap iron to avoid the cost of turning raw iron ore into blast-furnace pig iron and then turning pig-iron into steel. Scrap metal allows them to break into the steel-making steel cycle mid-way. They get their scrap iron directly from that old American industry which used to blanket virtually every city and town in America: the junk yard. During the decades before World War II, the Japanese did the same thing. Indeed they still do it on a large scale.

To turn the many materials which are in MSW into another product, something analogous to the old junk yard will have to become part of cities and towns across the country. It may be publicly or privately owned. This time the recycling center (no one would dare call a recycling center a "junk yard") will have to be able to receive, process, compress, and ship glass, paper, aluminum, tin cans, and plastics on the way to all the many places where many firms in many different industries can do their own exercise in manufacturing cost-avoidance.

By comparison with the old scrap metal junk yard which loaded railroad cars and sent its wares to essentially one industry, the modern American recycling center will have to be operated by people who possess a far wider range of market information than was previously required for the old junk yard. With the complexity of many different markets and materials, many of which have more than one market, any community really serious about diverting waste from landfills and into secondary materials markets would do well to turn all aspects of the process over to private firms which have direct, world-wide, market information.

The National Solid Waste Management Association reports that 125 recycling laws were passed in 38 states plus the District of Columbia in 1989. In all, 26 states plus the District have comprehensive recycling laws. Six of the ten largest American cities have curbside collection efforts to move potentially recyclable material toward markets. [67] In Michigan, several counties either now have, or are preparing to have, mandatory recycling laws. [68]

With such growth in the number of community recycling programs, and with more expected, many materials which were never part of the old scrap yard will have to be moved into secondary materials markets. In such a situation, markets may be expected – as both EPA and OTA have noted – to become extremely volatile. Some materials will move easily most of the time, but not all the time. Some will move slowly most of the time, but not all the time. Some will seem to never move at all.

Among the materials currently moving from the source-separation point into secondary materials market, aluminum tops the list at 25% (that's percent of total waste; more than 54% of all aluminum soft-drink and beer can in the U.S. are recycled); paper follows at 23% of total paper waste (recycled paper fiber is used in more than half the paper-board cartons found on the shelves of a typical U.S. supermarket.) Glass comes in at 8% (but 25% of all glass bottles and jars); metals are at 4%; rubber and leather at 2%; and plastics hold last place at one percent. [69]

While there is still much progress to be made in the plastics category, the industry is now investing hundreds of millions of dollars in facilities designed to process and apply materials from secondary sources. Approximately 130 million pounds of polyethylene terephthalate (PET) from 2-liter soft-drink bottles are being recycled each year. While public health laws do not allow PET to find its way back into food packaging, it sees new life as carpeting, construction materials, and stuffing for jackets. Suppliers of high-density polyethylene (HDPE), the material used to make milk jugs, are working hard to turn this material into other uses. [70]

Getting ready to develop a recycling program in any community involves investing scarce resources and preparing to enter markets which may be quite new to waste management officials in many communities. Recycling may save money or it may lose money. The why and wherefore of this issue has to do with the economics of secondary materials markets. The next section addresses some of the economic problems facing those who enter those markets.