• Everyday Economics: Replacing tradition with government central planning for garbage removal created problems in Cairo, Egypt.

    Why Recycling is More Expensive

    Jun 28 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic History, Environment, fiscal policy, Government, International Trade and Finance, Labor, Lifestyle, Regulation, Thinking Economically • 78 Views

    In 2013, 75,000 Washington D.C. sites got new trash receptacles. Hoping to increase recycling volume, the new bins held 32, 48 and 64 gallons. The 96-gallon size is called the supercan.

    Social norm to recycle with more in the supercans

    From Washington Post

    The supercan did not work out as they expected.

    Where are we going? To the cost of recycling.

    Recycling Expenses

    In 2011, Washington D.C. received $389,000 for its recyclables. Now it is paying $1.2 million to have them removed.  Waste Management (a large recycler) tells us that 2000 municipalities are in the same predicament.

    One problem is sorting. Hoping to encourage recycling, municipalities like Washington D.C. have minimized sorting rules. The downside is what winds up in the supercans. Everything gets tossed in–the Amazon box is okay but not necessarily all of the inside foam and plastic waste. And beyond that, our clothes hangers, shoes and garden hoses now fit too. One D.C. official said residue was up by a ton because of the supercan.

    And that residue has to be removed before recycled materials are sold. So, from the curb, the contents of those blue bins are trucked to a Material Recovery Facility (an MRF) where the contents are sorted. Using a clever sounding spinning device with magnets and conveyor belts, the machines at the MRF send the light stuff like cardboard upwards and the heavier glass and plastic and metal in the opposite direction.

    But because the cans are thinner, the plastic lighter and we read fewer newspapers, the sorters make more mistakes. And they also have a glass problem. Easily shattered, one third of all glass winds up in a landfill.

    Then, compounding our recycling woes, China is demanding less. To make it even worse, she has become pickier. Seeing some plastic bottles in a paper bale, the Chinese inspectors typically say no. That bale then has to return to an MRF to re-recycle it. The result is less recycling from our waste stream.

    Our Bottom Line: Social Norm

    Thirty years ago when a garbage-filled ship called the Mobro left Islip, New York in search of a landfill that would buy her load of refuse, she traveled for 6,000 miles down the east coast to the Caribbean. After rejections from several states and countries, the Mobro returned to Islip with a full load and became a symbol of the need to recycle.

    Since then recycling has become what behavioral economists call a social norm. But the norm is broad and therein lies the problem. It does not differentiate between good and bad recycling behavior. Most of us believe recycling is desirable. For its opportunity cost to be minimized, that norm needs to become more specific.

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  • rainbow hacker honest positive

    Honest Hackers

    Jun 27 • Perspectives • 53 Views

    By Astha Puri

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  • Ask Alexa Economic Advice from econlife.com

    I Scream for Ice Cream

    Jun 27 • Ask Alexa • 51 Views

    Dear Alexa,

    With the the warm weather, my children and I have developed a sweet tooth for ice cream. My kids always go for the quadruple scoop cone with sprinkles and hot fudge. I am always left with a sticky mess and super-energized little ones. However, their smiling faces make me melt. Should I limit their ice cream intake to fewer scoops or continue to indulge them?

    Sincerely,

    Hungry Harry

     

    Dear Hungry Harry,

    Doesn’t ice cream just taste so good when it’s a hot summer day?! I face the same consumption problem because frozen yogurt has become one of my favorite indulgences. In order to solve our dilemma, I turned to some fellow economists and discovered that our sweet treat trouble revolves around the concept of positive and negative externalities.

    We unconsciously deal with positive and negative externalities everyday. Essentially, this idea states that when someone takes part in an activity, their actions affect the well-being of another person, whether or not they mean to. For example, a child gets a vaccine for the flu and goes to school. The other children who have not already received the vaccine will benefit from his immunity because they are indirectly protected. This is an example of a positive externality since the kids benefit from their classmate’s inoculation and subsequent inability to catch or spread the flu. Alternatively, when companies emit toxic substances into a water source, the public is indirectly impacted. Some are unable to drink clean water while others cannot swim due to the contamination. This is an example of a negative externality because bystanders, the population, are negatively impacted by the companies’ actions.

    How do positive and negative externalities relate to our ice cream conundrum? With every ice cream cone your children consume, you take satisfaction from their happiness. Your happiness and your children’s happiness then makes everyone around you happier, as in a chain reaction. Therefore, the bystanders benefit from someone else’s actions.

    So, what’s our solution? Giving your children four scoops of ice cream disperses their happiness to everyone around and creates an atmosphere of bliss, even though the serving size may seem exorbitant. So yes, live a little and spread the joy- one bite at a time.

    Sincerely,

    alexa-sig

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  • The econlife.com Weekly Roundup

    Weekly Roundup: From Raisin Reserves to Greek Bank Reserves

    Jun 27 • Businesses, Demand, Supply, and Markets, Economic Debates, Economic Growth, Economic History, Economic Humor, Economic Thinkers, Financial Markets, fiscal policy, Government, Innovation, Labor, Macroeconomic Measurement, Money and Monetary Policy, Tech, Thinking Economically • 55 Views

    Our Posts Roundup

    everyday economics and calculating drug prices by value Sunday 6.21.15

    The drug prices that some doctors want to calculate…more

    everyday economics and safety regulation Monday 6.22.15

    Why safety regulation can increase risky behavior…more

    everyday economics and entitlement spending Tuesday 6.23.15

    What the Court’s healthcare decision avoided…more

    everyday economics and safety regulation Wednesday 6.24.15

    How online sales are cutting Gillette’s business…more

    everyday economics and property rights Thursday 6.25.15

    Why raisin growers care about the “Takings Clause”… more

     

    Cash withdrawals from Greek banks constrain economic growth and reflect monetary policy problems. Friday 6.26.15

    Finding the Greek cash stash… more

    Ideas Roundup

    • inelasticity
    • supply
    • market system
    • property rights
    • regulation
    • Peltzman Effect
    • cost
    • entitlements
    • subsidies
    • healthcare
    • creative destruction
    • innovation
    • supply
    • price floor
    • monetary policy
    • bank reserves
    • euro zone
    • money multiplier

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  • Cash withdrawals from Greek banks constrain economic growth and reflect monetary policy problems.

    Greece’s “Cash in the Mattress Indicator”

    Jun 26 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Financial Markets, fiscal policy, Government, Macroeconomic Measurement, Money and Monetary Policy, Regulation, Thinking Economically • 67 Views

    A Greek bank teller recently told a customer who was withdrawing 20,000 euros, “Had you come in last week without warning, I wouldn’t have been able to give you so much cash. We didn’t have the money.”

    Cash Flight

    Greek depositors are withdrawing their savings. Worried that collapsed Greek debt talks could lead to a euro zone departure and a return to the drachma, people in Greece want the security of having their euro cash.

    You can see below that cash is indeed fleeing from Greek banks.

    Greek monetary policy and cash flight

    Where are we going? To the economic impact of cash withdrawals.

    Hiding Places

    Just like good investing advice, people are suggesting hiding place diversification. With robberies on the rise, a victim can hand over the cash from one spot and still have others that remain.

    What are the possibilities?

    In addition to their mattresses, people are wedging money beneath loose bathroom tiles and also burying it in the garden. They have figured out how to place a small box with money in an AC unit or to sew it in the pleats of draperies. And yes, mixing cash with food in the freezer is always an alternative (frozen assets??).

    Our Bottom Line: Monetary Policy

    Once euros flee Greek banks, they move beyond the reach of monetary policy. As banks’ reserves plummet, so too do the loans they can make. As a result, the money creation that feeds economic growth contracts.

    I guess we could say that “cash in the mattress” is an inverse indicator of economic growth.

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