Why has it been harder to successfully recycle some materials extracted from MSW than others? What may be some of the problems associated with full and sustained recycling of some plastics extracted from MSW? While this has been discussed at some length above in terms of the relative importance of any given input in the overall costs of production, one more observation is in order – an observation having to do with supply elasticity.

In both the EPA and OTA reports noted in Chapter II, great attention was given to the need for government to try, through tax incentives or other forms of fiscal influence, to increase the demand for goods made from secondary materials. OTA argued that if demand could be increased, the U.S. could achieve a 10 percent recycling rate for plastic containers and packaging by the mid-1990s.

In addition, if recycled plastic products could capture a significant share of the treated lumber market, plastics could achieve a 25 to 40 percent recycling rate over the next decade. Moreover, OTA boldly projected that PET recycling could reach a level of 300,000 to 350,000 tons, or at least 50 percent of all PET beverage bottles, by 1993. If this were accomplished, the report suggested, fully recycled PET could replace up to 4 percent of virgin PET sales. Actions to increase demand could take 330,000 tons of HDPE, almost 6 percent of virgin HDPE sales. [95]

The assumption in the OTA report is that markets for paper, glass, and aluminum would grow if special financial incentives were given to increasing the demand for secondary materials products in general. Given the vast amounts of plastic products in the economy, and given the current very low rate of plastics recycling, the current conventional government view is that all that is retarding a boom in plastics recycling is demand. What is virtually always ignored in this argument is the fact that no matter how much plastic product there may be in the economy, plastic does not represent anywhere near the share of MSW that it does of consumer products in general.

Clearly any thing which might increase the demand for secondary material would, other things equal, increase the quantity of secondary material supplied. (Remember that until the quantity of secondary material supplied rises, the quantity of material sent to landfills or incinerators cannot fall.) But what increase in demand might be required to substantially increase the quantity of secondary material supplied?

The answer is, demand for secondary materials would have to increase substantially to pull such materials away from landfills and/or incinerators in volumes sufficient to make a real dent in the amount of waste being landfilled or burned.

Suppose special financial incentives could increase the demand for secondary plastic to make, say, "Plastic Lumber". In one of its reports focusing on plastics, EPA noted that given the nature of plastics products most likely to be in MSW, the system for collecting and shipping MSW plastics, and the prevailing technologies for using this material, plastic lumber may initially have a sales price 50 to 300 percent higher than for comparable wood items. [96]

There can be no doubt that plastic lumber would last longer than ordinary wood. But with that price difference, it won't compete with wood. Why? Because all people have what economists call a "positive rate of time discount", which is to say, a dollar in hand is worth more than a dollar to be received later.

If plastic lumber cost, say, 10 percent more than wood, it might sell. But not if it cost 50 to 300 percent more. That is reality. Anyone who doubts that should ask why people will pass up a long-life light bulb at $1.59 in favor of a normal-life light bulb at 50 cents. They do so because the $1.09 difference has immediate use now in other things which can be bought for money. Most people act as if they would rather keep the $1.09 difference to spend on other things now rather than enjoy not having to buy another light bulb for a year. With a price difference in the range expected for plastic wood compared to ordinary wood, the long-life advantage of the former will not be sufficient to make it a viable competitive product.

The economic lesson is this: so long as technologies for the whole recycling process are such that capital outlays will have to be made to collect, store, process, and ship materials; and so long as capital outlays for new technologies which use secondary materials are still in their infancy in some manufacturing procedures (current manufacturing technologies – including raw materials shipping technologies – are fully geared for virgin material) both the supply and demand curves for secondary materials may be expected to be highly, though not completely, price inelastic.

Indeed, the fact that every observer has noted the price volatility for secondary materials is clear evidence of the price inelasticity of both quantity supplied and quantity demanded in secondary materials markets. Price volatility is the trade mark of highly price-inelastic markets.

With inelasticity in the system, any increase in demand, even a significant demand increase generated by preferential government subsidies, will put significant upward pressure on secondary material prices, with very little increase in the quantity offered in response to that rising price. It is simply the case that the whole system of source-separating, collecting, processing, and shipping recyclable materials from the MSW to the point where they might be used is still far too costly relative to the cost of bringing specially produced virgin material to industries which could, theoretically, use one or the other.

The moral of the story from careful economic analysis is that the price inelastic nature of the supply of secondary materials, if not also the short-run demand function for such materials, will force prices for secondary materials into a virtually non-competitive price range with virgin materials long before technologies are adopted to use secondary materials.

One very important reason for the huge price difference between "plastic lumber" and lumber from conventional sources – a price difference noted above – is the simple fact that the cost of getting plastic from primary users and waste disposers is high. The kinds of plastics found in MSW must be collected, separated, cleaned, baled, and shipped to some point where, after further processing, it can stand side-by-side against virgin resins. In order to cover these costs, the price obtained by those who conduct all these operations must be as high, if not higher, than what virgin materials cost. That is part of what is meant by price-inelastic supply – only a high offer price from those who intend to manufacture new products from secondary material will induce the measurable increases in quantity of secondary material supplied to assure final manufacturing users the continuing volume of raw materials they need.

Essentially the same problem exists for virtually all other post-consumer articles in MSW, including, surprisingly, aluminum. Aluminum companies, one should remember, were sending their own trucks to collect cans and paying individuals and groups for all the cans they could deliver long before state deposit laws began to add to supply. What state deposit laws have done is make it possible for them to access supplies at somewhat lower costs to themselves. Yet, even with this boost to supply, they still have not been able to obtain all they would like to have. Quantity supplied has not been sufficiently responsive to demand – even when augmented by deposit laws.

Clearly, passing laws to force households to engage in source separation is not going to automatically result in more recycling when recycling is properly understood. Indeed, the evidence from both New Jersey's statewide mandatory system, and from Seattle, Washington's mandatory curb-side collection system – a system which has not yet yielded cost savings sufficient to compete with landfilling [97] – strongly suggests that laws which ignore markets cannot yield true recycling on the scale envisioned by those who seem to believe that all that's needed is the right set of laws.

There's got to be a lesson here. Certainly laws can change behavior. After all, no household which is not source separating either at the curb or at the recycling center wants to pay a fine and no manufacturer wants to pass-up government subsidies for using secondary materials if he thinks his competitor is going to take one. Pass a law and behavior will change.

But it is not only behavior which will change once laws are passed. The cost of handling solid waste will also change. All government programs have their own "overhead" costs and those costs must, if we are going to do honest accounting, be counted as part of the cost of handling MSW through government mandate. However, the lesson from laws already on the books is that all the laws in the world will not pull MSW into the secondary materials markets so that real recycling can occur if the market is not yet ready to use secondary materials in place of virgin materials.