by Elaine Schwartz    •    Jan 19, 2011    •    609 Views

Hearing Beethoven’s Fur Elise, a Taiwan resident knows the garbage truck is near. As described by a Washington Post writer, entire neighborhoods assemble with their garbage as the truck approaches. Called pay-as-you-throw (PAYT), through unit-pricing, people are charged for their garbage removal.

A Freakonomics podcast explained that certain U.S. municipalities were less successful. Perceiving the payment as just another tax or costing too much time, residents of Sanford, Maine eliminated PAYT after 4 months. Elsewhere, to lower their garbage expense, people threw garbage in the woods or flushed it down the toilet (which created plumbing problems).

How then, whether looking at PAYT, buying local, or recycling, can green initiatives ensure their goals?

The Economic Lesson

When people support PAYT, the amount of garbage decreases by 17%. (A sociologist quoted this statistic in the Freakonomics podcast.) Facing a heretofore non-existing cost, people recycled, they mulched, they gave items away.

Others, opposing the approach, tried to circumvent it. They threw trash in the woods or tried to get the policy repealed.

This takes us to the heart of economics. Incentives shape our behavior. The obvious response to a greater cost for garbage removal is to throw out less. We can see though, that new incentives might instead create unintended consequences. We then need to ask whether the benefit still outweighs the cost.

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