Hi Cam, Would love to have a good chat about waste along the similar lines of this blog. So much food waste generated in big shopping centres in the city. How much does McDonalds throw out. The externalities of litter and impacts on the environment, and the rise and rise of Uber Eats and the waste of human capital.
I take your point, but given we "insure" ourselves against food insecurity already and yet many people in our respective societies go hungry now, would it not be fair to assume that a sudden decrease in food production would simply result in roughly the same ratio of waste, and an increased number of hungry people?
Well, yes, but it perhaps doesn't bode well for those political possibilities if we have to rely on some ambiguous tipping point of destitution before we 'activate our insurance' 🫤
Also can’t underestimate the role of refrigeration and efficient transport networks. Getting 100 bananas to market when faced with bumpy roads, no bridges, poor packaging, no refrigeration, poor security, etc is challenging. Most will perish in the process.
Not sure, but the economics would have run something like this; it costs $500-700m to develop a new landfill. It costs us $x to dispose to current landfill. We have 10 years left before landfill is closed.
We know current stream of waste is 50% green waste. If we can remove that waste, we can extend landfill life. If we can move towards zero waste, then we can be more judicious about using existing landfill. Stack the cost of the green waste program against $500m and it pays for itself.
There is an extensive variety of contentious statements made in this article, as I don't have time to write a response that lists out sentence by sentence where logical or technical issues present themselves I will outline some generalities here for thought:
- waste is only waste when there is no immediate perceived economic use, what about non economic uses, I.e. uses or disuses that are not measured. Why would excess not be considered surplus instead of waste in the case of commodities that do not decay quickly and are stored in some manner
- waste produced requires energy and other factors of production for it to be created in production. This means that unused excess production that is binned is a waste of the energy used to produce it, in order for this to work as a sort of insurance as described in the article it is in fact the unused productive capacity that is the insurance and not the produce itself in the case of items that decay quickly.
- for excess to be considered waste or surplus then an element of entrepreneurial judgement is required. For example waste heat in iron ore production which historically would of been considered waste is now considered a surplus to production as it can be used for cogeneration or in some plants in Japan for fish farming. In the article we might also think of food waste as valuable fertiliser in some cases.
- in the case of services we can consistently see waste where the services rendered consume energy but produce no useful output.
Have a think about the above, I've tried to demonstrate that the article does or does not make sense on the basis of the definitions and system of thought used.
I feel like many of your comments are restating my case. E.g. surplus commodity production is exactly a type of buffer stock insurance to accomodate variation in demand in the future.
This article ignores the moral edge of the food waste debate: it is “wrong” to thrown food out when people are underfed. That’s primarily an argument about mis-allocation, not waste. And it’s not about efficient markets, production and insurance, it’s about the moral failure of a production system. It’s analogous to Cam’s studies of market provision of housing: it won’t get everyone housed, and that’s not a “market failure”, it’s a moral failure of the housing system, and of political will. Hence, arguments of economic efficiency are tangential to the heart of the food waste debate, which is fundamentally about the moral duty to provide adequate food. All major religions I know of have a “feed the poor” duty, which sets the stage for the food waste debate.
The part about food overproduction as insurance in case of famine is just wrong, modern states have emergency food reserves precisely for such situations: THAT is the correct analogy to airbags and armies, not overstocked grocery store shelves (which is more like the idea that all citizens need to be well armed, just in case).
Interesting post! You said it yourself, "many examples of investments look like waste in retrospect but were sensible investments". I think the crux of the issue with waste is how the investment is perceived, like any other, in terms of risk and return. This specific investment is a high intensity, low hit-rate one. Without going into the insurance analogy, a financial market equivalent would be a tail risk hedge, designed to "fail" 99% of the time and hit it big 1% of the time thanks to highly convex properties. But whereas your typical tail hedge is bought by an informed market participant, the issue of food waste is visible, odorous and concerning to just about anyone with eyes to see and a nose to smell with. The rules of this economic game of waste are understood by producers and wholesale buyers and distributors, not by the average Joe.
The result is that most people carry a visceral representation of waste, just about the most biased (and so the most un-economic) view one can take. They also see issues with social justice, and we should be careful not to imply that everyone gets roughly enough food + 30% above their needs throughout good times, and then the excess comes in handy for roughly everyone during bad times. You do not explicitly say this, but a simplified model of waste as a reducible economic concept can imply it. Instead, food security issues are pervasive (albeit limited) in developed countries and worse in developing countries, even those that produce lots of waste.
Some food categories are more likely to go unconsumed - fresh foods, produce and other perishables are natural victims to a system of over-production and over-consumption, and in their case the over-production comes in handy in a time of crisis. Products like canned food on the other hand, almost have "no right" to be wasted beyond a minuscule margin from inventory pile-ups and, like you mentioned, the ebbs and flows of supply and demand.
In keeping with our investment analogy, as a portfolio manager (capital allocator, government agency or whatever) I'd want to tweak my risk and return profile by reducing canned food waste as much as possible and figuring out how much of a buffer society really needs in terms of perishables. One could argue that these tweaks are already being made by, again, forces of supply and demand, but stopping there doesn't really allow us to accept the fact that we could pull levers instead of abandoning the issue of food waste to market forces, which often behave irrationally or in inefficient ways. Just because a majority of waste is being generated as a byproduct of what seem to be rational economic decisions on the surface doesn't mean we shouldn't analyze and criticize these economic decisions further, like we would with any other made by a person or a company.
As a bit of a wild example, the current over-manufacturing of cars in China to flood European and US consumer markets with cheap electric vehicles to drive out competitors is a result of broad market forces behaving in a highly wasteful way - thousands upon thousands of cars sit in parking lots across China, having "wasted" energy and labor for the "benefit" of slashing margins across the entire industry. It's difficult to imagine the benefits outweighing the negatives in this case, and I think that's how a lot of people would react to a strictly economical view of waste.
You start from trying to work out if there's anything wrong with the incentive structures we have. If you want locally made compost you can make some in your garden or your local community garden. A lot of recycling requires precisely the kind of view Cam is arguing for — of a whole system lens rather than looking at the 'waste'. We subsidise the recycling of paper when it would reduce carbon emissions to bury it as carbon capture. Recycling it contributes little. Likewise we ban single use plastic bags when they have many good environmental qualities over the alternatives.
An interesting interpretation and forthright attempt to tangle with the concept of waste as the antithesis of efficiency. Narratively this works and has led to a excellent read about the positives inherent in the modernisation process. An idea that has been widely embraced but not integrated into common parlance, outside of economics, when it comes to conservation is negative externality, this is a much better way to capture the real waste/inefficiency concept that is trying to be mitigated, the issue at hand is the misallocation of cost not the misallocation of resources the latter of which, as you mentioned, is not as great an issue for market based economies, if consumer and producer utility optimisation is the only metric.
Hi Cam, Would love to have a good chat about waste along the similar lines of this blog. So much food waste generated in big shopping centres in the city. How much does McDonalds throw out. The externalities of litter and impacts on the environment, and the rise and rise of Uber Eats and the waste of human capital.
I take your point, but given we "insure" ourselves against food insecurity already and yet many people in our respective societies go hungry now, would it not be fair to assume that a sudden decrease in food production would simply result in roughly the same ratio of waste, and an increased number of hungry people?
I think this depends on political situation during such events and how we distribute food - do we take abnormal distributive actions or not?
Well, yes, but it perhaps doesn't bode well for those political possibilities if we have to rely on some ambiguous tipping point of destitution before we 'activate our insurance' 🫤
Also can’t underestimate the role of refrigeration and efficient transport networks. Getting 100 bananas to market when faced with bumpy roads, no bridges, poor packaging, no refrigeration, poor security, etc is challenging. Most will perish in the process.
Auckland Council recovered 30,000 tonnes of food waste in the past two years through its Green bin system. That's remarkable.
Not sure, but the economics would have run something like this; it costs $500-700m to develop a new landfill. It costs us $x to dispose to current landfill. We have 10 years left before landfill is closed.
We know current stream of waste is 50% green waste. If we can remove that waste, we can extend landfill life. If we can move towards zero waste, then we can be more judicious about using existing landfill. Stack the cost of the green waste program against $500m and it pays for itself.
There is an extensive variety of contentious statements made in this article, as I don't have time to write a response that lists out sentence by sentence where logical or technical issues present themselves I will outline some generalities here for thought:
- waste is only waste when there is no immediate perceived economic use, what about non economic uses, I.e. uses or disuses that are not measured. Why would excess not be considered surplus instead of waste in the case of commodities that do not decay quickly and are stored in some manner
- waste produced requires energy and other factors of production for it to be created in production. This means that unused excess production that is binned is a waste of the energy used to produce it, in order for this to work as a sort of insurance as described in the article it is in fact the unused productive capacity that is the insurance and not the produce itself in the case of items that decay quickly.
- for excess to be considered waste or surplus then an element of entrepreneurial judgement is required. For example waste heat in iron ore production which historically would of been considered waste is now considered a surplus to production as it can be used for cogeneration or in some plants in Japan for fish farming. In the article we might also think of food waste as valuable fertiliser in some cases.
- in the case of services we can consistently see waste where the services rendered consume energy but produce no useful output.
Have a think about the above, I've tried to demonstrate that the article does or does not make sense on the basis of the definitions and system of thought used.
I feel like many of your comments are restating my case. E.g. surplus commodity production is exactly a type of buffer stock insurance to accomodate variation in demand in the future.
This article ignores the moral edge of the food waste debate: it is “wrong” to thrown food out when people are underfed. That’s primarily an argument about mis-allocation, not waste. And it’s not about efficient markets, production and insurance, it’s about the moral failure of a production system. It’s analogous to Cam’s studies of market provision of housing: it won’t get everyone housed, and that’s not a “market failure”, it’s a moral failure of the housing system, and of political will. Hence, arguments of economic efficiency are tangential to the heart of the food waste debate, which is fundamentally about the moral duty to provide adequate food. All major religions I know of have a “feed the poor” duty, which sets the stage for the food waste debate.
The part about food overproduction as insurance in case of famine is just wrong, modern states have emergency food reserves precisely for such situations: THAT is the correct analogy to airbags and armies, not overstocked grocery store shelves (which is more like the idea that all citizens need to be well armed, just in case).
You can likely connect this to Graeber's "Bullshit jobs". I would like to see how you might do that.
Interesting post! You said it yourself, "many examples of investments look like waste in retrospect but were sensible investments". I think the crux of the issue with waste is how the investment is perceived, like any other, in terms of risk and return. This specific investment is a high intensity, low hit-rate one. Without going into the insurance analogy, a financial market equivalent would be a tail risk hedge, designed to "fail" 99% of the time and hit it big 1% of the time thanks to highly convex properties. But whereas your typical tail hedge is bought by an informed market participant, the issue of food waste is visible, odorous and concerning to just about anyone with eyes to see and a nose to smell with. The rules of this economic game of waste are understood by producers and wholesale buyers and distributors, not by the average Joe.
The result is that most people carry a visceral representation of waste, just about the most biased (and so the most un-economic) view one can take. They also see issues with social justice, and we should be careful not to imply that everyone gets roughly enough food + 30% above their needs throughout good times, and then the excess comes in handy for roughly everyone during bad times. You do not explicitly say this, but a simplified model of waste as a reducible economic concept can imply it. Instead, food security issues are pervasive (albeit limited) in developed countries and worse in developing countries, even those that produce lots of waste.
Some food categories are more likely to go unconsumed - fresh foods, produce and other perishables are natural victims to a system of over-production and over-consumption, and in their case the over-production comes in handy in a time of crisis. Products like canned food on the other hand, almost have "no right" to be wasted beyond a minuscule margin from inventory pile-ups and, like you mentioned, the ebbs and flows of supply and demand.
In keeping with our investment analogy, as a portfolio manager (capital allocator, government agency or whatever) I'd want to tweak my risk and return profile by reducing canned food waste as much as possible and figuring out how much of a buffer society really needs in terms of perishables. One could argue that these tweaks are already being made by, again, forces of supply and demand, but stopping there doesn't really allow us to accept the fact that we could pull levers instead of abandoning the issue of food waste to market forces, which often behave irrationally or in inefficient ways. Just because a majority of waste is being generated as a byproduct of what seem to be rational economic decisions on the surface doesn't mean we shouldn't analyze and criticize these economic decisions further, like we would with any other made by a person or a company.
As a bit of a wild example, the current over-manufacturing of cars in China to flood European and US consumer markets with cheap electric vehicles to drive out competitors is a result of broad market forces behaving in a highly wasteful way - thousands upon thousands of cars sit in parking lots across China, having "wasted" energy and labor for the "benefit" of slashing margins across the entire industry. It's difficult to imagine the benefits outweighing the negatives in this case, and I think that's how a lot of people would react to a strictly economical view of waste.
Love that you’re thinking about this. How would you advise incentive structures or promote recycling, compost, etc?
You start from trying to work out if there's anything wrong with the incentive structures we have. If you want locally made compost you can make some in your garden or your local community garden. A lot of recycling requires precisely the kind of view Cam is arguing for — of a whole system lens rather than looking at the 'waste'. We subsidise the recycling of paper when it would reduce carbon emissions to bury it as carbon capture. Recycling it contributes little. Likewise we ban single use plastic bags when they have many good environmental qualities over the alternatives.
https://clubtroppo.com.au/2018/03/31/plastic-carry-bags/
And on it goes.
An interesting interpretation and forthright attempt to tangle with the concept of waste as the antithesis of efficiency. Narratively this works and has led to a excellent read about the positives inherent in the modernisation process. An idea that has been widely embraced but not integrated into common parlance, outside of economics, when it comes to conservation is negative externality, this is a much better way to capture the real waste/inefficiency concept that is trying to be mitigated, the issue at hand is the misallocation of cost not the misallocation of resources the latter of which, as you mentioned, is not as great an issue for market based economies, if consumer and producer utility optimisation is the only metric.