A. A Little Bit of Economic Theory

Nobel Laureate George Stigler notes that "The first and purest demand of society is for scientific knowledge: knowledge of how the economic system works. Whatever role one may play in society, it is useful to know the causes and consequences of economic phenomena." [46]

How does our economic system – an economic system based on reasonably well-defined private property rights and freedom of exchange – work? It works on the basis of choices people make while attempting to satisfy their own personal wants by simultaneously supplying others with what they want.

In such a system, buyers will seek to buy at the lowest possible price commensurate with the quality and durability of product wanted and suppliers will search for ways to supply what is wanted at the lowest possible cost commensurate with the quality and durability of products demanded by consumers.

Therefore when one observes any particular mix of goods being successfully marketed to consumers, the only sensible conclusion one can draw with any degree of certainty is that what millions of individual consumers continually buy is nothing more nor less than what each individual believes meets his own subjectively determined wants. If that were not the case, the current mix of goods moving through the market place would make no sense at all. Goods not wanted would disappear in favor of other goods. Therefore, what is there, is there for a reason.

Likewise, successful suppliers will attempt to use only those production techniques and materials which keep production costs below the prices demanders are willing to pay. If that were not the case, firms which failed to take account of costs would eventually fail in the face of competitors who develop alternative production techniques and employ other materials which would allow them to capture the non-innovating firms' markets.

An economic system based on exchange must have some device which constantly sends signals which tell both producers and consumers what works and what doesn't. That device is a system of relative prices or, if one prefers, a system of relative exchange ratios – i.e., the rate at which one thing can be exchanged for another. Without such a system, producers' efforts to satisfy consumer wants while minimizing production costs; and consumers' efforts to minimize outlays while simultaneouslymaximizing their utility, would have to take place in an environment in which no one could know with any reasonable degree of certainty where to go or what to do.

Moreover, given that all goods and services are produced from resources which are scarce relative to the uses to which people want to put them, everything exchanged for something else in the market competes with everything else which is exchanged – no matter where or in what industry.

With everything ultimately dependent on everything else, efforts to intervene in that system to change even one element of the production/consumption process will impact all other elements of the production/consumption process. In some cases, the impact will be immediate and the consequences significant. In other cases, the impact will be less immediate. But in all cases of government intervention into the production/consumption process, there will be with consequences.

If this is a fair, if all too brief, picture of our basic economic system, then the first point one should note about any municipal solid waste stream – whether in Michigan or any other part of the country – is that everything in it, is there for a reason. Food waste, grass clippings, newspapers, plastic milk jugs, paper milk cartons, you name it; it's all there for a reason.

If more plastic, and less glass, wood, and metal, is part of MSW now than 30 years ago, there's a reason. If more paper, especially newsprint and packaging material, is there now than 30 years ago, there's a reason. If more households are now bagging their grass clippings and putting it all out with the garbage compared with 30 years ago, there's a reason.

The reason should surprise no one. Plastic has replaced glass, wood, and metal in many common household products because, with no loss in product quality, it costs less to use plastic than it does to use either glass, wood, or metal. (Keep in mind that the cost is not just the cost of actually making the product, but also the cost of transporting and storing the product until it is in the final user's hands.) If that were not so, the waste stream would contain more wood, glass, and metal and less plastic.

There is more paper – particularly newsprint – because, as the economy has grown and markets have become more competitive, newspapers have become larger. A growing economy means more firms competing with one another for the consumer's attention and competitive market forces foster more and more print advertising. More print advertising means larger newspapers and larger newspapers means more paper which has to be put somewhere.

Once again, there is a reason for everything and everything has a reason. Any legislative intervention into the solid waste stream aimed at changing the mix of goods being consumed and produced which takes no account of the reasons why the structure of the product stream is what it is will have consequences. Some would argue that the resulting changes in the structure of consumption and production would make us all better off. Some would argue that it would make us worse off. Addressing the logic of both positions is one part of what this study is all about.