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That’s not exactly a canard, it’s closer to a non-sequitur. Nonetheless, it is invoked often by those who favor an even heavier hand of government to regulate and restrain market activity.

First of all, there is no such thing as “markets.” Does the New York Stock Exchange wake up in the morning and throw out reams of paper? Do the computers that are the brains of eBay spontaneously spew chemicals into the nearby waterways? Of course that is silly, which is why it is absurd to make comments like, “markets” produce waste (and just as absurd to say, “governments” produce waste). But though it is silly, it has seemed in my view to have picked up incredible pejorative rhetorical force.

Second, ignoring the rhetorical issues above, where exactly does waste come from? Or more fundamentally, what the heck is waste in the first place? Or how can it possibly cause a problem? The last question will be the subject of a future post. The simple point of this post is that the production of “waste” has nothing to do with market forces. A simple thought experiment should make it clear why. Imagine a company that makes paper. It cuts down trees in a nearby forest. It trucks the trees to a mill, where the trees are ground into a pulp. That pulp is trucked to a paper factory where it is combined with all kinds of interesting chemicals and machinery to spit out reams of nice, clean, white paper, perhaps packaged in a petroleum based plastic packaging. This company is private and the paper is sold on the “market.” Is the fact that it is private and the paper is sold in stores determine whether there is pollution? The chainsaws used to cut the trees leak oil and emit harmful fumes. The trucks and trains used to haul the logs emit CO2 and other particulates. Their tires wear out and end up in dumps. Their seats tear and those plastics end up in dumps. Their engine coolant sometimes spills. And when the wood is turned into pulp, it must be done using machinery powered by electricity – often this is electricity produced by burning coal, which produces sulfur dioxide, nitrogen dioxide, carbon dioxide, coal ash, mercury, and other particulates. And finally, when the pulp is turned into paper, the chemicals may possibly contaminate nearby air and waterways. And in each stage of this process, some pieces of the tree are “wasted” and not used; some energy that is input into the cars and machines are not used and are therefore wasted. The containers for many of the chemicals may end up in dumps and therefore “wasted.” And so on.  It is easy to point to all stages of this process and look at all of the “waste” that has been generated.

For your thought experiment, change two tiny things. Eliminate the for-profit private owners of the paper process and replace it with the People’s Paper Producing Process (i.e. have the government own all the means of production and run all of the processes) and then instead of allowing consumers to go to the market to get paper, have the Paper Czar set a monthly allocation for every end user of paper, and then have the paper delivered to each user every month by the government. Does anything in this change lead to less waste being produced? No waste? Of course not. It is absurd to even suggest that it would. When the government operates a chain saw, does it suddenly stop burning fuel? Does the chain oil never leak when in the hands of Uncle Sam? Do internal combustion engines inside of government owned vehicles not spit out CO2 and other particulates. When the government uses chemicals, does it use every last drop, or magically get the chemicals from the chemical plant to the paper factory without having to use a container?

In fact, given a basic understanding of the differing incentive structures across for-profit private sectors versus the non-profit and government sectors would have you understand that there are extremely powerful forces that would promote a reduction in waste in the private market process as compared to the government non-market process. Think why.

But even if the incentive structures are exactly the same, the point is obvious – waste does not come from the fact that a good is produced privately or collectively, or how it is distributed. Waste is the byproduct of production processes. If the government is in the business of producing, then “waste” will be generated. So it is patently absurd to make comments like, “markets produce waste” as if it is some indictment of freedom and the capitalist economic order.

Now, is there any context in which the criticism makes any sense? Yes, of course. It makes some sense because under private market orders characterized by free exchange and secure property rights, people are richer. More “stuff” is created. And when people are richer and more stuff is created, there is by definition more waste coming from those processes. But this is not what the general criticism seems to be. If it were, then the criticisms ought to be that “production produces waste” and we ought to not produce stuff. Now, there are a few anti-consumerists ought there making these sorts of arguments. But the general environmental movement that is hostile to market forces seems to be offering us the idea that if only our production was done collectively, or done “for people” and not for profits, that somehow all of this waste would disappear. That is pure nonsense. Maybe this is a giant straw man, but from a good many conversations I have had with concerned environmentalists, this is, indeed, what the arguments are boiling down to. Perhaps I need to get out of academia to clear my head a bit.

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8 Responses to “Markets Produce Waste”

  1. blink says:

    The argument is clear, but I don’t think this interpretation of “markets produce waste” captures what believes mean. The “waste” they see is often product diversity — why do we need McDonalds, Burger King, Wendy’s, etc. when they are so nearly the same? Wouldn’t it be more efficient if we standardized processes across fast food restaurants and just hand one type? Though I think this “waste” criticism of markets fails as well, it is true that monopolistically competitive firms do not produce a cost-minimizing quantity.

  2. jb says:

    As wintercow is aware, I have been troubled by use of the the word “waste.” Or more accurately, its misuse.

    At my daughter’s college cafeteria, large signs scold those who “waste” food by taking more than they will eat, and, even though they pay for it, disposing of the rest.

    My visceral reaction is, quit scolding me you pretentious jerk-placer- of- signs. My emotions muddle my thinking though. Intuitively I know this is wrong; but I can’t quite lay out the argument. I THINK it goes like this: I have worked and produced goods/services equal in value to what I have paid for my lunch, I am now exchanging the value of what I have created for food. So even though the nuns told me that I was starving kids in China when I dumped my tuna sandwich in the trash, the fact is the sandwich would not exist if I had not “created” it. So even though I am disposing of it, I have not taken anything from anyone.

    Do I have that right? Before I risk confronting any nuns, I want backup.

  3. jb says:

    Just realized you said you’d take up the larger issue of what “waste” is in a separate post. I look forward that.

  4. Rod says:

    In the People’s Paper Company, accountants would spend most of their time looking for costs to justify the price they would charge for paper, as a public utility looks for things to include in the rate base. Wintercow Paper International would instead be making fiberboard and particleboard with what falls on the floor.

    Nothing focuses your attention on waste better than the bottom line of the profit and loss statement.

  5. Salem says:

    Honestly, I do think you are fighting a strawman. The arguments I normally hear that markets produce waste is threefold:

    First, as blink says, the very existence of competition. “Why do we need so many choices?”
    Secondly, those processes necessary to pursue competition, e.g. finance, advertising, law, etc. “If firms didn’t waste all that money on advertising…”
    Thirdly, externalities. “Companies don’t have to pay for the damage they create.”

    Really, though, “wasteful” is meaningless. Better is to ask – which system generates least waste? If you want to argue that the internal combustion engine is “wasteful,” it’s up to you to build something more efficient. While it’s certainly true that the market economy is not 100% efficient, what options are an improvement? Only the third objection has any real merit, and if anything we grossly overcompensate for social externalities (although I think we undercompensate for environmental ones).

  6. Harry says:

    Great questions and points.

    I do have some question in classifying the CO2 given off by the chainsaw as waste rather than the result of combustion. Those molecules may be breathed by Maine vegetation, or may even find their way to politically correct trees in Sweden.

    Even Peter Singer would agree that we shouldn’t deny the plant Kingdom the breath of life, right?

  7. Harry says:

    Saleem, it is a straw man if it mischaracterizes the serious arguments of the other side, and defining who is the other side can be elusive. But I do not think Wintercow is being unfair in characterizing many of the arguments of the Left who espouse all sorts of loopy, illogical, and unscintific theories about the environment to justify taking control.

    Back when the IPCC was dreaming up Kyoto, the Berlin Wall had fallen and Germany was dealing with unification. One detail of Kyoto allowed Germany to count all the East German industrial plants in their baseline for determining how many carbon credits they would get for making those plants more energy-efficient, which was easy. The French were happy to go along as long as the treaty would give them plenty of credits, too. Thus did state-run East German steel mills change from being an albatross into a money machine.

    There are many who believe state-run enterprises produce better outcomes than privately-run enterprises, including less waste and pollution, not to mention fairer distribution of wealth. Just ask Michael Moore or Arianna Huffington. Or Raoul Castro, who would ride herd on jb for tossing half of his tuna sandwich in the trash. Bet there isn’t much garbage going to Cuban landfills.

  8. [...] If markets produce waste, does that mean all other settings don’t? [...]

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