TEXT OF INTERVIEW

KAI RYSSDAL: It's that time now for a little Freakonomics Radio. It's that moment every couple of weeks where we talk to Stephen Dubner, the co-author of the books and the blog of the same name. It is about the hidden side of everything. Dubner, always good to have you back.

STEPHEN DUBNER: There is no place I'd rather be.

RYSSDAL: All right, I don't believe that. But anyway, so I was in New York a while ago, a couple of months ago, came by your apartment, and you had me do this thing that was actually rather disgusting. Let's roll some tape here.

RYSSDAL: All right. I have brought my latex gloves. So this won't hurt a bit. Let's go out and look at your trash. We have flowers. We have...

DUBNER: Those were my wife's...

RYSSDAL: OK. I'm sorry. Seriously, on the top of the recycling thing is a little Dewars Scotch, White Label.

DUBNER: Now aren't you glad at least I recycle? But Kai, don't you think we should at explain to the people why you were actually going through my trash here?

RYSSDAL: We should. We had some time to kill on the Upper West Side of Manhattan and... No, no. You had this thing about trash and the economics thereof, right?

DUBNER: Guilty as charged. Here's the thing. Trash is a gorgeous illustration of what you call the free-rider problem. A lot of us just take our trash for granted. We stick it out on the curb -- voila, it disappears.

RYSSDAL: Except we pay for it, right? It's either in our property taxes or it's in our water bills. I mean, it's not like it's free free.

DUBNER: Right. It's not free free, but the fee is hidden. And moreover the fee is a flat fee, which means I get to throw away as much trash as I want. So why bother to produce less? If my electricity bill were a flat fee every month, I would never turn off a single light in my house. Listen to Lisa Skumatz, she's an economist at a consulting firm that helps cities deal with their trash.

LISA SKUMATZ: Makes me think about an all-you-can-eat buffet. As in, all-you-can-throw-out trash with no incentives for people to think about the cost of what they're doing.

Now for 25 years, Skumatz has been working with a model called "Pay-as-you-throw," which forces people to put their money where their trash it.

RYSSDAL: Yeah, they have it actually here in parts of L.A. It's the more you put on the curb, basically, the more you pay.

DUBNER: So you're kind of at the center of the boom and it has been a big boom. A few years ago, 20 years ago, you go back, fewer than 200 places in the U.S. had "Pay-as-you-throw." Now we're up to about 7,000 or about a quarter of the country. So a trash consultant like Lisa Skumatz, she loves it. Now that people are paying for what they toss, their behavior changes. And here's the best part: If you're in government, "Pay-as-you-throw" makes it easy for you to start billing directly people for trash pick-up. So bingo, new revenue streams. Sounds pretty win-win, right?

RYSSDAL: Yeah, if you're in the mood of giving the government your money. But OK, go ahead.

DUBNER: Exactly. Some people, as you could intuit, are a little bit less than thrilled by it.

MARK GREEN: Oh yeah, I'm sure there are effigies of me hanging from numerous places in people's houses.

That's Mark Green, who's the town manager of Sanford, Maine. Sanford introduced "Pay-as-you-throw" last July. People had to pay $2 for every big purple, "Pay-as-you-throw" bag of trash. It worked great. Trash volume was cut in half. But some people there in Sanford, like Len Mustacchio, they thought the idea stank.

LEN MUSTACCHIO: Anything that's a fee, might as well be a tax. It's one and the same. You don't have a choice. Although they'll tell you, 'You do have a choice, you can throw out less garbage.' Well what am I supposed to do? Eat it?

So in November, the voters in Sanford repealed "Pay-as-you-throw."

RYSSDAL: Yeah, so Dubner, get me to the hidden side of this. I mean, incentives matter, right? If you tax, essentially trash, what happens?

DUBNER: Well, you've got to understand, incentives matter. And the people who design them think they know how people are going to respond to them. But the fact is, they don't. You introduce an incentive and people respond to it in a way that benefits them. So with the trash tax, yes. A lot of people might pay dutifully. Some towns like Sanford, Maine, might repeal their tax. And other places, they'll do things like in Ireland, there was a spike in emergency room visits for burn victims because a lot of people started burning trash in their backyard to avoid the new tax. This is kind of where economics and psychology hook up. If you're accustomed to getting something for free, and then you're asked to pay for it -- even if it's just a couple of bucks -- you might get really unhappy. Like if all of a sudden, I started charging you, Kai, a dollar every time you said the word "Freakonomics" on the radio.

RYSSDAL: OK. So you know what, you actually wouldn't be on the radio very much. That's actually what would happen. But we will bring you back again in a couple of weeks. That's Stephen Dubner, "Freakonomics Radio."

DUBNER: One dollar right there. One dollar right there.

RYSSDAL: I know, right? FreakonomicsRadio.com is his website. Two dollars. See you in a couple of weeks.

DUBNER: My pleasure, Kai. Thanks.