The ‘Broken Window Fallacy’ is Back
2023-01-15 · Guest: Mike Munger (Professor at Duke University) · 52:46
Green energy and the broken window fallacy
Bob Zadek and Professor Mike Munger discuss the “Broken Window Fallacy” as it applies to modern green energy policies and environmentalism. They explore the distinction between creating jobs and creating wealth, the economic reality of recycling, and the misconceptions surrounding landfill shortages and resource conservation.
Topics: Broken Window Fallacy, Frédéric Bastiat, Green Energy, Recycling, Economics of Environmentalism, Cash for Clunkers, Landfill Management, Resource Allocation
Speakers:
- Bob Zadek: Host
- Mike Munger: Professor of Political Science, Economics, and Public Policy at Duke University
Introduction and the Broken Window Fallacy [00:28]
Bob Zadek: Hello friends, I’m Bob Zadek, host of the country’s longest-running libertarian broadcast, nationally streamed at 8:00 AM Pacific time Sundays on the 860 AM app. The archives of my Bob Zadek Show podcast hold 15 years of major issue discussion and is the ideal resource to revisit our prior missteps, since so many reappear. I promise you in-depth content on social, political, and economic issues that really matter, always with the ideal guest, accessible and entertaining. Our standard: ideas, not attitude; information, not talking points.
Today’s returning guest, Professor Mike Munger, exceeds those standards. Mike Munger is the professor of political science, economics, and public policy at Duke University and is a senior fellow of the American Institute for Economic Research, AIER. I invited Mike to join us today immediately after reading his recent blog entitled “Green Energy is the Modern Broken Window,” written for the American Institute for Economic Research and published at aier.org. What a wonderful opportunity, I thought, to bring together the broken window fallacy written almost 150 years ago by economic journalist Frédéric Bastiat in the context of the 1.7 trillion—yes, with a T—so-called Inflation Reduction Act, since so much of that act’s spending is devoted to the religion of environmentalism. Mike, welcome back to the show.
Mike Munger: It is a pleasure. Thank you.
Bob Zadek: Oh, thank you so much, Mike. Now, we start with the broken window fallacy first presented to a French audience in the 1850s, plus or minus. Who was Frédéric Bastiat? Why do I read and reread so much of his writing? And why did you select him as the cornerstone of that piece you wrote in AIER?
Mike Munger: What’s interesting that over time, I think we select for the best of a particular era. And maybe somebody will look back in 2070 at the current era and there’ll be some things that they still read, but most of what is said or read won’t still be read. Frédéric Bastiat has survived because he was an essayist and satirist, but his insights about economics are timeless. And I guess the way that I would summarize his key insight—and it’s so obvious that it has to be said multiple times—almost everything that politicians think is a benefit is actually a cost. Almost everything that politicians think is a benefit is actually a cost. And so the things that you or I or any rational person would think of as being a cost, politicians—and actually rightly—think that’s a benefit because it’ll help them get reelected.
Bob Zadek: It’s a—of course it is a benefit, as you just pointed out, but to them, not to us. And as an aside, Michael, I can’t help—I often have guests who will defend a proposition, an economic or political proposition, on the basis that it works. They will say, “Well, because it works.” And I’m tempted to say, “No, it doesn’t.” But in reality, Michael, just as you pointed out, it does work for them. It gets them reelected. So of course it works, even if it harms everybody else. So when somebody defends something by saying it works, don’t be quick to attack them. Ask them the standard of what “works” means. And you have just pointed out the same thing in a different context.
Jobs vs. Wealth [04:42]
Mike Munger: That’s a really good way of setting up the question, because what Frédéric Bastiat—his insight that he comes to over and over again—is that politicians, journalists, most people focus on the seen. And of course, that’s the things that we can see. And so we’ll say, “This works.” Bastiat said that in economics, we really have to focus on the unseen. And the unseen are the things that would have happened if we had not done—if we had not taken the course of action that we took.
And so that’s why the broken window fallacy is so interesting. Someone had apparently suggested in one of the French newspapers that a broken window was actually a benefit because it creates jobs. Look, the glazier has to come and has to make some glass. The guy who puts the window in, he has work he would not otherwise have had. These are all good things. It works. What Bastiat said was, “Well, wait. Consider the unseen.” And the unseen is I had to spend money buying the glass. I had to spend money paying some schmo to come to my house and put the glass in. Furthermore, those two people also would have been doing something else. So three people actually used up resources. I used up money, the glazier used up glass, and the installer used up time. All three of those things would have been used for something else that we will never see. And so the idea that breaking stuff to create jobs works is pervasive throughout our society. And one of the things that provoked me to remember Bastiat was how frequently in the environmental movement exactly this same flawed argument about creating new jobs is made. It’s that we have learned nothing since 1855.
Bob Zadek: And I’m reminded, as an aside, I’m sure you remember the story of Milton Friedman in an early visit to Maoist China. And he was shown around their economic system, and the guide for Milton Friedman proudly demonstrated how many workers were building—I think it was a dam or enlarging the riverbed of a river—and there were so many workers. And he was boasting that they didn’t use heavy equipment because if they didn’t use heavy equipment, they could create more jobs. And Milton Friedman famously observed, “Well, but they’re using shovels. Why not give them teaspoons and you create even more jobs?” And you gave me an excuse to tell that wonderful story. I believe it to be true—don’t know, wasn’t there.
So that’s the broken window fallacy. And as I recall, I believe Bastiat wrote that piece in response to another article when somebody was observing that a fire—a fire perhaps in London—was wonderful in that it created so many jobs rebuilding London after the fire. And he couldn’t resist but explaining the fallacy, the broken window fallacy. Now, let’s—so that was the headline of your piece in AIER. Now, in your piece, you made a very important point that is so—it’s too obvious for people to know about it. And you made the distinction between creating jobs and creating wealth. That was an important part of your piece in the article. So explain that distinction and then apply it to the environmentalism principle you were speaking to in your piece.
Mike Munger: Well, that’s a really big question. I want to try to do it in a way that’s actually coherent, which I might have trouble with, but let me give it a shot. So “create jobs” is the mantra that gets politicians elected. And in fact, if we look at the number of jobs that are created—I’m not sure what that means, because jobs actually are a contract between someone who needs labor services and someone who needs income. So jobs are created by the private sector. What politicians hope, I guess, is that they can create the conditions where the private sector creates jobs, or they can do what government does and just announce, “We’re going to put a bunch more people on the payroll.” That’s not exactly the same thing as creating jobs. But from the people who are occupying the jobs, it may look a lot the same.
The advantage of the broken window fallacy is that glazier and that person who was going to put the glass in, those are real jobs. Those are private sector jobs. What Bastiat was responding to was an article about burning down—London had had a fire by accident. And a French person had estimated that a very large amount of jobs had been created. Bastiat said, “Well, let’s burn down Paris.” And he was obviously kidding, but he said, “If we started fires in all of the four places—all the four corners of Paris—and there’s a good wind, we would have so many jobs because need creates jobs. People wouldn’t have a place to live, they wouldn’t have anything to eat. Think how great that would be.” And then he said, “Okay, that doesn’t make any sense. What we want is not jobs for their own sake. What we want is wealth. And wealth is a place to live and something to eat. Why would you destroy wealth to create jobs?” And so that was the essence of my article, was just repeating Bastiat, noting that what people want is wealth. In fact, a lot of people, if they had wealth but didn’t—and they were so wealthy they didn’t need to have a job, you know, like a college professor like me—then that would be great. I don’t have to have a real job. I’m so rich. Well, most people, if you ask them, “Do you love your job?” they’ll say, “Sure, I like my job. I like to work. It’s important to me. It’s a big part of my identity.” But the reason they work is to be able to get wealth for them and their family. If we’re going to destroy wealth to create jobs, we’re missing the point. We’re just committing the broken window fallacy. And that was then what I tried to connect to the new green energy movement.
Cash for Clunkers and Environmental Damage [11:37]
Bob Zadek: You know, Michael, as you were speaking, every time you speak, every time you’re on the show, my brain takes off uncontrollably. And what I jump to when you started explaining this, what I jump to is I flashed back to early in President Obama’s first term. Remember “Cash for Clunkers,” when he was going to create jobs by inducing people to get rid of, to sell perfectly useful old cars?
Mike Munger: Which they were going to destroy.
Bob Zadek: Exactly right. Let’s destroy old cars and create jobs because now people are going to have to have new cars to replace the perfectly useful old cars. And you had these old cars that were not worth very much money, but they performed a valuable function. They provided transportation inexpensively. And his concept, not having read Bastiat, or if he did, he had forgotten about it: “Let’s destroy all the old cars and imagine how much better off we’re going to be.” Isn’t that exactly Bastiat’s lesson backwards?
Mike Munger: So what would Obama say to what you just said? And the answer is, “Well, yes, but this was about the environment. We’re trying to protect the environment.” And I saw someone who did an estimate on this. The amount of new cars that would have to be built to replace all of the old cars that we were just destroying, even though they were perfectly serviceable, would have done something like five times the environmental damage that the old cars were doing. It’s true the old cars were burning a lot of gasoline. Some of them put out quite a few pollutants. But it takes an enormous amount of energy to build a new car. It takes a gigantic amount of energy to build the stuff that goes into the car. So the fact that we were going to destroy all of these perfectly good cars, all of this wealth, in order to create jobs, not only did it not—and the reason your example is so good—not only did it make us poorer, it was worse for the environment. It didn’t even succeed on its own terms because it required so much energy and material to make all of these new cars to replace all of the wealth that we just wantonly destroyed.
Bob Zadek: So there it is. If Bastiat’s writing seems out of date—perish forbid—here we had an example not 10 years ago, or perhaps just about 10 years ago, with a 21st-century president saying, “Let’s destroy wealth to create jobs.” It’s almost like since a human being consumes oxygen and expels CO2, environmentalism ought to say, “Every time we kill somebody, the environment is better off. So let’s just do it randomly and we’ll improve the environment.”
Environmentalism as Sacrifice [14:52]
Bob Zadek: Now, environmentalism and economics. There are core principles of environmentalism that crash into, they just contradict every concept of sound economic thinking. In fact, I don’t think no one has ever made an economic case. They make the case based upon quasi-religious beliefs and “save the planet,” “save the whale,” “save the polar bear.” But tell us how, as an economist, when you look at environmentalism writ broad—and Michael, we’re going to drill down to recycling because you’ve written quite a bit on that—but in the big picture, tell us about the economic impact, just a pure economic impact, on society, on the planet if you will, but you’re not going to speak that broadly, the economic effect of environmentalism on 21st-century life.
Mike Munger: Well, let’s take a couple of premises and just accept them. Let’s suppose for the sake of argument that there is such a thing as global warming and that it is anthropogenic in that the expelling carbon by the use of fossil fuels at least contributes to global warming. So for the sake of argument, let’s suppose that those two things are true. What environmentalists have done is to fetishize, to turn into religious tokens, garbage. They have acted as if what we need to do in order to save the planet—and you’ve heard this—is to recycle, to reduce the amount of stuff that we put in landfills.
Now, Germany was worried about the amount of nuclear waste that they were going to have because they had a lot of nuclear power plants and there were protests in Germany: “We need to shut down the nuclear power plants in order to save the environment.” The problem is—and this was the question that you asked—it doesn’t seem like the premise “we need to conserve resources” leads to the action, which is “we need to shut down nuclear power plants.” In fact, if you wanted to conserve resources, you would probably want to continue to use nuclear power. What’s happened instead was since Germany closed down all its nuclear power plants, they have been forced to run natural gas as a source of a lot of their electricity this winter. And because there was a war in Russia and Ukraine, the price of that has gone up substantially. So they have had to use ships and other means of acquiring that natural gas. I’ve seen estimates that have said Germany is using nearly three times as much fossil fuel as it was before it closed down its nuclear power plants. So those are the steps that you talked about in your question. There’s this view, this sort of murky view of Gaia, the Earth Mother, a kind of quasi-religious worship. And we need to do things to show how much we care about Gaia. And if you have a religion, you’re not so much interested in doing things for you; you’re interested in sacrificing. So the sacrifice that we’ll make is we’ll give up these nuclear power plants, we’ll give up cars that actually run, we’ll give up warmth during the winter and we’ll wear sweaters. That sacrifice means that we’re now stuck with a set of policies that use more fossil fuel and create more carbon that’s worse for the environment as a result of this religious view. So as an economist—that was a long answer—as an economist, I’m surprised how often this quasi-religion ends up harming the environment more than a greedy capitalist like me would.
Bob Zadek: You know, you used, to me, when you said the word “sacrifice,” that’s a magic word in discussing environmentalism. Because sacrifice means “do without.” Now, we all understand that one of the profound benefits of growth is that our lives get better, not worse. Sacrifice means make your life worse, deny yourself something which would otherwise be available. That’s what sacrifice means. Think of the word in its bloodiest meaning: it means killing somebody to curry favor with the gods. So we’ll sacrifice a human being because the gods will like us better. Now, sometimes sacrifice is required, which means it’s not voluntarily living for less; you have no choice. Therefore, you’re required. Parents may be required to postpone their own pleasures so their children get a benefit. That’s not a sacrifice; that’s part of life. But the sacrifice—and it’s the word I never have used as such in describing environmentalism—but environmentalism says “do without something today because…” dot, dot, dot. The “because” doesn’t get finished except in the vaguest of terms: “save the planet.” If somebody is being asked to spend quality of life—that’s what a sacrifice is, spend—you have to get something tangible in exchange rather than just “the gods will like you.” So that word really captures it all.
The Religion of Environmentalism [21:11]
Bob Zadek: And Michael, I’ll turn over to you in a second for one more sentence because I’d like you to speak to this. I describe environmentalism as the mother of all wealth transfers. It’s transferring wealth from the present presumably to the future. But why? Why am I—should I be persuaded to live worse so that somebody who I’ll never meet a thousand years from now will theoretically live better? Please, Michael.
Mike Munger: First on sacrifice. I think it’s easy to conflate or confuse cost or investment with sacrifice. Now, saying that something costs something—I’m saving, I’m not eating as much, I’m not going on vacation so I can save up to buy a house—that’s not a sacrifice; that’s an investment. Maybe me taking less so that my children have a better life—that’s an investment; that’s not a sacrifice. A sacrifice must be literally wasted. And you’re right that in religious terms, what was important was you would take the fatted calf, you would take a sheep, you would take a chicken, and you would put it on an altar and burn it so that it would go up to the gods. And it was important that it was burned, that it was wasted, because only that would then be a sign of your devotion to the god. That’s my concern about environmentalism.
Look, I’m an environmentalist. I’m a conservative. I think that we have a job to conserve those resources that we have to be able to pass them on to future generations by not wasting them. That’s very different from not using them. Using them, if you look at the history of human society over the last thousand years—it got a little bit better, and then it got a lot better. Would you like to be born in 1500 or now? Would you like to be born in 1700 or now? Would you like to be born in—fill in the year, I don’t care. Now is way better. As long as we have resources to use, society gets better. And society will be better a hundred years from now. If we use up some resources, we’re going to find others. There’s one resource we can’t make more of, Bob, and that is time. Environmentalists want us to sacrifice time, which we can’t get back, to show how much we love the environment. That’s the thing that really irks me. I’m an environmentalist. They want me to sacrifice for no reason other than to show my love.
Bob Zadek: When one says “I’m an environmentalist,” environmentalism either describes—well, it describes a certain type of behavior. But as I often will say with guests, with friends, sharing your opinion is kind of interesting to me, but not so much. What’s fascinating is why you have that belief. Let me see the work papers. Tell me—I only will learn from you when you tell me why you think something. And if your thinking is sound, I’m in because I want to be smarter. But if you told me your opinion and then changed the subject, I’m not going to be persuaded. It’s, “Oh well, you and I are different,” and that’s the end of it.
So environmentalism—is it—am I correct that—and I haven’t heard this expressed so much, so that makes me think maybe I’m missing something, and you’ll point that out, I hope. And the point is that if you had to summarize the environmental movement—and “movement” is an appropriate description—as a transfer of wealth, which I said earlier, from the present to the future, predicated on the assumption that whatever environmental problems result from our being on Earth will not be solvable? They’ll never invent air conditioning. You know, they’ll never learn how to heat a home from the inside. So is it too simplistic or is it reasonably accurate to say that all we are doing is we are compromising our quality of life so that somebody we will have no relationship with and will never meet will in theory have a better life? It’s nothing other than that.
Mike Munger: I don’t think environmentalists are primarily concerned about future generations of humans. They’re concerned about the welfare of the planet. They’re concerned about the welfare of non-human species. They’re concerned about the purity of oceans. So they’re conceiving of the entity, the larger entity of the Earth, as having, if not rights, then at least we have obligations in order to be stewards of this. And there’s actually— there’s a lot of traditions where this goes back a long way where you’re not supposed to change things.
I think that the difficulty that I have with many people who call themselves environmentalists is that they don’t like people. It’s not so much that they want future generations to have things; they want the world to be unchanged. So in the Marvel Universe, the Avengers movies, there’s this one really bad guy who, as far as I can tell, is a perfect environmentalist. He’s really concerned about the future of the universe. His name is Thanos. And he has this power, he has these stones that when they come together, he is able to kill half the people in the universe. And he doesn’t care at all about future people. What he cares about is the universe itself so that it’s not overburdened by these parasites called humans. I actually think that at its core, environmentalism hates humanity. So I think you’re understating it when you’re saying we’re supposed to care about future generations. We’re supposed to kill ourselves so that the Earth can survive.
Bob Zadek: You said a second ago that environmentalists oppose change. And of course you’re correct. Don’t despoil the planet. When I hear that, I say to myself, in other words, any time you “paved paradise and built us a parking lot,” any time you put pavement where there used to be earth, that is anti-environmentalist. When I used to hike, there was a form of hiking called “no sign,” I think it was called “no trace.” You are supposed to hike in the woods so that there was no sign you were there. You didn’t leave a footprint, you didn’t break a branch, you didn’t step on a beetle. That was like the theoretical goal, as if you are shaming Earth by leaving a mark. Well, that means don’t build anything. Do not touch anything. Live in a cave, because anything you build is converting something from a natural form to a man-made form, which violates environmentalism or the principles. And that’s it at its core.
The Economics of Recycling [28:30]
Bob Zadek: Now, you have written a lot and spoken a lot about part of the movement, and I want to spend some time on it because I just—I’m in love with the concept and the misunderstanding of recycling. So tell us about the recycling concept and how environmentalists get it wrong.
Mike Munger: A fair number of environmentalists, I think, get recycling right, but they’re not the vocal ones and it’s not the politically popular position. So let me say, I said before I was an environmentalist, and I am. I’m also an avid recycler. Every day when I drive my car to work, I drive that same car home. I don’t buy a new one. I use that same car again. I use it over and over again. This shirt—I’ll probably recycle it. I will use this shirt over and over again. And nobody has to tell me to do it. So if you have some old silverware, you don’t throw it away; you melt it down because the silver is valuable. You recycle it. So the point is that you don’t need to be told to recycle resources that are valuable because prices are telling you to do what environmentalists think a moral person would do, that is, I should consider these resources to have value. Well, if it’s actually a resource, it does have value.
People who are avid recyclers want us to attach value to things that are actually trash. And how do I know it’s trash? A resource is something you will pay me for. Trash is something I have to pay you to take. That means it has negative value. It is not a thing that anybody wants. I have to pay you to take it. Why would we recycle trash is the question that I have for environmentalists. Now, there are some that recognize this is actually an interesting problem. And to be fair, we underprice landfill space so that we don’t have people doing illegal dumping. So the cost of using landfills, particularly for cities in California, is probably in some sense too low because we don’t want people just to dump the trash in some vacant lot, which means that it may be cheaper for me to throw something away than it would be to use it in a way that is more responsible. Okay, fair enough. We have to—this is a problem that we have to work on.
There is no reason to fetishize trash the way that we do. So let me say two things that almost nobody will believe me, but that I can document to be true. First, you mentioned that anytime we change something—if we put up a house where there used to be trees, that’s really bad. Well, in almost all of the country, and especially in the part of the country where I live in North Carolina, there is 20 to 30% more forest land now than there was in 1900. There is 20 to 30% more forest land now than there was in 1900 because we’re so much more efficient under capitalism with farming that we can produce far more on less land. There is more forest now than there was in 1900. If you’re an environmentalist, you should be saying, “Yay, capitalism!” But that’s not what they’re saying because we want to restrict people’s sense of happiness and belonging for wealth.
The Myth of Landfill Shortages [32:04]
Mike Munger: The second thing that I want to say about environmentalism is that there was a mythology that we were losing landfill space. We don’t have enough landfill space; there’s a shortage. Well, that was because there was a report from the EPA in the late ’80s and early ’90s saying we were closing a lot of landfills because they were unsafe. And that was true. A lot of them were leaking poisonous chemicals. So they were closing these small, unlicensed landfills. They built hundreds of new landfills that have a rubber seal underneath them, and so that way the leachates can’t get out. And we closed thousands. We closed thousands of landfills, we opened hundreds. Isn’t there a shortage? No. We have 50% more landfill space than we had in 1980. Let me say it again: we have half again as much landfill space right now as we had in 1980 because we closed thousands of inefficient, bad landfills and we opened hundreds of good, highly efficient, highly healthful landfills. There is no landfill shortage in the United States. Recycling is a religious sacrifice to show that you care about the environment. It is actually environmentally wasteful because it’s a huge waste of energy. The energy that we spend on recycling—and I have a number of stories about this, but I’m interested to get your thoughts—the energy we waste on recycling is criminal. If you care about the environment, you should outlaw recycling tomorrow.
Bob Zadek: What’s most interesting—you just said a semester’s worth of information in that prior two sentences. You used one of my favorite economic concept words. You used the word “shortage.” I will tell you—I’m going to seem like an idiot—but I will tell you that word almost has no meaning. We never have had a shortage of anything. We have—as there’s no such thing. “Shortage” really means price, not quantity. Do we have a shortage of diamonds in this world? Diamonds are very expensive, but anybody who wants a diamond can have it if they pay the price. Anybody who wants a house anywhere, including San Francisco, can live there if you can pay the price. So I don’t even know from an economic concept what the word “shortage” means. There’s always exactly enough because the supply-demand mechanisms make sure of that.
And the second point you raised that to me was also fascinating: when you talked about landfills and you said at one time the evils—one of the evils of landfills—it was leaching poison into the water table ultimately and harming people. And then you explained to us that then they realized or discovered that they could line them with rubber. In other words, the landfill, the garbage, was temporarily put into the ground because that made the most economic sense at the time. And what happened? We discovered science and industry went forward and discovered a product that would fix the problem. So it isn’t that we despoiled future generations; we deferred the problem until there was a solution, and then it got fixed. And that’s what environmentalism gets wrong. They assume knowledge is frozen in 2023 and nobody will ever figure out how to fix anything like sea rising, if it is, or CO2. They forget that piece of it. So if you can—if you will—if you think it’s helpful to our audience, either contradict or expand upon those concepts that environmentalism forgets: that science and knowledge continually makes the world better, and we are not permanently affecting the planet. We’re taking a problem, treating it economically sensible today until a solution is found.
Regulation vs. Tort Liability [36:51]
Mike Munger: I have three responses. First, there is such a thing as a shortage, and there’s a shortage of housing in San Francisco because of rent control. If the price mechanism is not free to adjust, then you can have a shortage because there’s not nearly enough housing at the rent-controlled price. New York has a terrible shortage of housing because of rent control. If you go to the City Council and try to build something in New York, it’s next to impossible. But there’s people living in rent-controlled apartments that nobody—poor people—can’t find. So first—and I don’t understand why people don’t understand this because it is obvious—it is literally impossible to run out of anything as long as the price mechanism is free to adjust. It’s literally impossible. It’s not hard; it’s impossible to run out of anything as long as the price mechanism is free to adjust. Now, all the time we prevent the price mechanism from adjusting, and so it seems like there are shortages. That’s actually not true.
Another thing that you said, which I thought was interesting, was the problem of adjustment. Now, I think a lot of people would tell the story, “Yeah, but those landfills—why did they start using these rubber membranes to prevent leakage? It must have been because of regulation from the EPA. That is, private markets acting on their own would never have figured this out. It was government action you’re trying to claim credit for.” Well, that’s actually not true. What happened was there is a system in private enterprise called torts, where you can sue if someone does damage to your property from an adjacent property. The reason that the landfill companies started taking additional care was their exposure to private liability. Now, there—we have problems with lawsuits and private liability, but these companies updated the technology for disposal on their own in response to the threat of lawsuits more than—eventually, yes, the EPA started to inspect it and it became part of the regulatory apparatus. But this system is self-correcting as long as you let prices operate and lawsuits for torts or damages are an important part of that. You don’t need external regulation.
The Waste of Mandatory Recycling [39:09]
Mike Munger: The third thing is, and I just want to tell a story about environmentalism, about recycling. I said before that mandatory recycling is a bad idea. There’s two kinds of recycling: there’s voluntary recycling, which people will do because of the price signals that this thing is a resource. Mandatory recycling means that you have to do it even though it doesn’t make sense in terms of prices. So I did some research. I was doing some interviews 15 years ago and I was talking to a young woman in New England who—she was the head of their recycling public relations for a small town in New England. She was very earnest. I feel bad making fun of her, but she deserves it. And I said, “You’ve got a little truck, a gasoline or diesel-powered truck—and maybe it’s electric, so it’s coal-powered—but no matter what, you’ve got this little vehicle that drives around after the garbage truck has gone by. You’ve already picked up the garbage. You’re separately picking up this other class of garbage on the theory that somehow it’s worth something. And a lot of it, there’s no market for, that nobody wants to buy glass, ground glass or cullet in these little rural areas, and glass is very expensive.” And she said—I swear, it sounds unbelievable, but it’s true—she said, “Oh, Professor Munger, you have to understand, recycling is always cheaper no matter how much it costs.”
Recycling’s always cheaper no matter how much it costs. And I made her repeat it and I said, “Child, bless you,” because I really cannot think of a better summary of the mindset of the recycling evangelists than, “Of course it’s cheaper because you’re not throwing it away. That’s always better.”
Bob Zadek: You know, when you were telling that story, I have to respond with an anecdote again, a true story about voluntary versus imposed, mandated recycling. Back in the 1970s, when people used paper—there were paper files—I had a client who would send me these binders, these big paper files for me to work on. And they were held together with the biggest, blackest, tightest rubber band I ever saw. And I never had seen this before. They were huge files held together with black rubber bands. And I called him. I said, “These are perfect. The files came perfectly intact. Where did you find these rubber bands?” He told me he made them as he cut up inner tubes and he made his own rubber bands all by himself. Which government agency told him to do that? None. He did it all by—it was Marty. Marty did it all by himself. And so yes, human beings will respond to sensible alternatives and they will do what makes economic sense. And when you have mandated—mandated, emphasize mandated—recycling, it’s recycling that makes no economic sense.
Mike Munger: You waste resources. It doesn’t even make sense on its own terms. This is not a sacrifice—well, I suppose it is a sacrifice—it is a literal waste of resources. You are using up more energy than if you threw the damn stuff in the landfill to begin with.
Bob Zadek: Michael, you’re mentioning every economic word that I love to play with. You used “sacrifice” and now you use the word “waste.” I have had guests on my show express dismay that we are wasting water, food, we’re throwing away food. And I took that concept of wasting food and I had a great time with it. For example, if I buy an apple, I own that apple. I can do whatever I want to do with that apple as long as it doesn’t harm somebody. I could eat it, and let’s say I’m not hungry. I just eat it because it’s there. Or I could throw it away. People would say throwing that apple away is wasting it, as compared with eating it when you’re not hungry is not a waste. The whole concept of wasting something flies in the face of private property. Once you own something, the world cannot tell you what to do with it.
Mike Munger: You’re making a moral argument and I don’t disagree. But California is trying to have laws saying that restaurants can’t waste so much food. Now, the reason restaurants waste food is they want to have fresh food for their customers. And they’re not wasting it; these are commercial enterprises. So the—yes, they can waste it if they want to. They’re actually saving resources by wasting food. The amount of effort and electricity it would take to keep this food from going to waste dwarfs the expense of the food that’s being wasted. So I think there’s two arguments here. One is the moral argument that it’s your property. A lot of people don’t accept that. I often, for the sake of argument, grant the claim: “Okay, let’s suppose this somehow all belongs to society.” If you care about the environment, you should allow commercial enterprises to waste food because it uses far more resources to try to prevent it from going bad, which is a natural process, or for finding some way to use it somewhere else. And suppose that’s not true, then that means you could make money by buying it from them. My proof is you can’t possibly make money by buying up this wasted food, which shows it’s a net waste of resources. So I think you have to—I want to pair both of those two arguments. First, yes, it’s my apple. But restaurants when they buy stuff, they’re not buying it to waste it; they’re buying it to provide fresh food to their customers. When it’s no longer fresh, they throw it away because that’s the least resource use of that. Anything else uses up more resources. If you care about the environment, you want to waste food.
Bob Zadek: When you reference California, I wonder if you were referring to a bit of California legislation that was enacted effective January 1st, I think of 2023, that mandated that counties and cities enact—take steps, they weren’t clear what the steps should be—take steps to prevent restaurants from wasting 25% of their food. That is, they could not just throw it away; they had to have a plan not to waste it. And the state legislature didn’t know how to do it; they just said, “Okay, every county must have a plan in place.” I think you were referring to that, but I’m not certain of that.
Mike Munger: Well, that is just what I was referring to. And so these are commercial enterprises that some schmo in the legislature thinks, “We’re going to save them some money because they’re too stupid to save money. They’re wasting food. If we just pass a law and say ‘stop wasting food,’ our restaurants will make more money and they’ll all thank us.”
Bob Zadek: Now, when you—in your work on recycling, because I know you’ve written quite a bit about it, I’m also infatuated with the subject—tell us a bit from what you have read or observed or calculated about, from an economic standpoint—and you can speak either writ large or writ small—about the typical municipal mandated recycling programs. Are they—I’ll use a very banal phrase—are they good for the environment or bad for the environment? For sure they’re good to get reelected, but are they good or bad for the environment from a purely economic standpoint? Of course, first let’s find out what it costs and then we’ll see if there’s a benefit commensurate with the cost.
Mike Munger: Recycling is diverting garbage from the waste stream because it has a resource value. Now, if you’re saying that what we’d like to do is reduce the amount of the waste stream, that’s a different thing. Recycling is very specifically diverting things from the waste stream into some alternative use. And then the default is that has to use less energy and less human time than it would to put it into the landfill.
So one of my favorite examples of recycling—and again, was talking to public relations people—was the fact that recyclers value clean glass much more than they do glass or plastic for that matter that has food residue. And so if you’re a good person, you will make sure and clean all of the glass and plastic before you put it into your recycling bin. And so I pointed out to this public relations person that—I mean, that’s a lot of hot water and time, and time is the one resource we can never get more of. And so you want human beings to waste their precious time by cleaning out jars before they put it into the recycle container. And again, she gave me a great quote: “Ah, well, they can just put it in the dishwasher.” So let me make sure I’ve got this right: you want people to run their mayonnaise jars through the dishwasher? And her answer was yes, because it’s much easier to recycle then. So notice that they’re assuming what needs to be proved. The question is, is this environmentally and economically wise to try to have this as a resource and reuse it, or should we just throw it away? They’re assuming we should not throw it away, and then the question is how can we make it the most valuable?
One more brief thing. When I lived in Chile, I watched—they had just opened up a recycling facility. And it was in Vitacura, which was a wealthy part of Santiago de Chile. And in order to get there, you had to drive up and they had a bunch of bins where you could put plastic, glass. I counted there was a 15 to 20-minute wait of people in line in their cars with their engines running so they could put two 2-liter bottles into the recycle container. So it was 20 minutes of their time and probably a tenth of a gallon of gas turned into carbon in the atmosphere so that they could put two bottles into the recycle. And I realized what this was. I’m Catholic. I realized what this was: this was a religious ceremony. Instead of getting the host, you put the sacred material into the recycle container. So I found that I think that was the clearest example that I’ve ever seen that this is a religious ceremony.
Bob Zadek: You know, Michael, we’re coming to the end of our show and what you have just done, I suspect intentionally, is end where we began with Frédéric Bastiat and the unseen. You talked about the engines burning, the CO2 going into the air, the carbon, the particulate going into the air. That was the classic Frédéric Bastiat’s unseen. How miraculous we have gone full circle in exactly the right amount of time. You should be a producer of a talk radio show, Michael. Thank you so much. This is Bob Zadek. We’ve been speaking with Professor Mike Munger, who can be followed on Twitter at @mungowitz. His most recent book is Is Capitalism Sustainable?, available on Amazon. Mike’s writing can be followed at aier.org. Mike, I know your time is valuable and I and my audience greatly appreciate the hour you’ve given us today. And to our listeners, I know your time is valuable and I hope you have found this to be content-rich and worthwhile. Thanks a lot to Michael, thanks a lot to my friends out there. So long for now.