Monday, January 25, 2010

More Trash, Bigger Bill

A pay-per-volume trash scheme could be coming to Frederick County, MD, according to WTOP.

The details of the program will be worked out with trash haulers, but it looks like county officials favor haulers offering several different trash can sizes, with a higher price for the biggest one.
Recycling would be offered on an unlimited basis, encouraging residents to put recyclables there instead of in trash bins.
The spirit of the program is to improve recycling rates. I will set aside the discussion of whether this is a worthy goal, in order to focus on how the program may be more difficult to implement than some imagine.

Ever since Ronald Coase's "The Problem of Social Cost" (1960) (PDF), economists have increasingly paid attention to the role of transactions costs. Transactions costs are those required to make a transactions outside of the money exchanged. For example, if the only way to get milk is to take the bus for 20 minutes each way, the true cost of the milk is not only what you paid for it but also the bus fare and the value of your time.

Some transactions cost problems I see for the proposed trash program:

(1) How will the city enforce the trash can size? What if residents have already purchased several trash cans from Home Depot or elsewhere? Will the city refuse to service these cans and insist that residents buy city-approved cans? Perhaps the city can give residents stickers to indicate that previously purchased cans have been approved; would garbage collectors have to check for the presence of these stickers every week?

(2) What if the amount of trash you need to throw away varies per week? Do you just have to pay the "big trash can" rate, even on the weeks you don't need it? Do you get the smaller garbage plan and keep the excess trash in your backyard on the weeks you go over? Will the garbage collectors individually document how many of each type of garbage can they collect at each house, and have an accountant bill you accordingly? Do most households even know how much garbage capacity they should buy?

I think that the program will prove to be more hassle than its worth. To steal an example from a professor, this is analogous to why restaurants don't charge for ketchup. Sure, some customers may have to subsidize the "heavy ketchup users," but the costs of monitoring the ketchup disbursement would far outweigh the few cents that would be saved in reduced ketchup consumption.

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