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Tracking the economy and GDP through trash
A truck empties its load of waste at the Shelford Landfill, Recycling & Composting Centre.
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Kai Ryssdal: Sure, there were some economic numbers out this morning. First-time claims for unemployment benefits: Meh. And housing starts: Also meh.
But how 'bout this? Trash. Garbage. Waste. Refuse. Therein, my friends, lies the economic truth. It came to me in a chart I saw online the other day -- railroad carloads of trash, as correlated to GDP. And the correlation is pretty close, too.
Economist Michael McDonough has worked out the GDP-to-trash indicator. Welcome to the program.
Michael McDonough: Hey, thanks for bringing me on to talk trash.
Ryssdal: Yeah, that's right. Explain to me how this works, because it's not like iron and steel -- which are the biggest components of all this stuff -- and demolition. It's not like that has anything to do with consumers buying more stuff and then throwing more stuff away.
McDonough: That's what's great about this indicator. It's holistic because it's not isolated to a single part of the economy. It's people throwing things out, it's buildings being demolished -- it's everything. The current levels are indicative that you may be seeing a weakness in new construction. I mean, if you're going to build a new building, there might be a building that's already there. If you buy a couch, you might be throwing out an old couch. If you go out to McDonald's and you buy something, you're going to throw something out. So the fact that it is as weak as it is right now means something's wrong in the economy, potentially, in the underlying economy.
Ryssdal: So what kind of trash we talking here? Is this everyday household waste?
McDonough: You know, it's a whole mix of trash, actually. What you have is almost half of what the trash is iron and steel waste, and then the next biggest component is your demolition and your municipal waste. So places like New York City, Seattle -- these guys are putting a lot of their trash onto trains, shipping it out to other states, and then dumping it there.
Ryssdal: And we should say that's where the data comes from, right? You get it from the American Association of Railroads or something, and those guys actually measure carfuls of stuff?
McDonough: Exactly. On a weekly basis -- that's what's even more interesting about it. When you think about the concept of using trash as a proxy for GDP, it's not a leading indicator. If anything, maybe it's a slightly lagging indicator, because you have to wait for people to throw things out, possibly. More than likely, it's a coincident indicator. Except, you know, for GDP, you need to wait a month or two after the quarter ends before you actually get that figure.
Ryssdal: All right now, did this come to you in the middle of the night one night? Why are you tracking trash, man?
McDonough: When I was in college, as a side project I guess you'd call it, I studied a lot of anthropology and archeaology. And one of the ways you can track ancient people migrations in the size was how much trash they left as they moved from point A to point B. So everything just kind of came together. I found the data, I ran the numbers, and it made a lot of sense in my mind.
Ryssdal: Michael McDonough, he's a senior economist at Bloomberg Briefs. We got him in Hong Kong. The graph that we're talking about, it's kind of crazy, the correlation. Michael, thanks a lot.
McDonough: Thank you.
Ryssdal: Mike said there's something wrong in the underlying economy? As bad as it's been since Lehman brothers is how wrong is what he figures. Have a look yourself at the chart above.
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I think Michael McDonough is right on the money. I provided engineering services at a landfill for 17 years and observed that more prosperity equals more garbage in spite of the best recycling efforts. I was the guy that tracked the daily tonnages of garbage and recycling. Think about what happens when your coffee maker or toaster finally wears out. Because of the combined metal, glass, plastic and other materials, these items will probably not be recycled, but will be thrown away. These items usually get replace quickly and in some small way immediately boost the economy.
Much like what was said by other commenters, I think that this is an interesting indicator because of its unique approach but perhaps a little behind the times in terms of matching economic prosperity with increased purchases. The "green movement" has changed consumer behavior fundamentally - consumers will still buy goods but there is a greater emphasis on buying reusable products instead of one-time use/disposable products. Companies like ours http://www.paperlesskitchen.com and others in the sustainability business recognize that consumers are more critical of their purchasing habits and work hard to manufacture and source products that are sustainable and ideally reusable in order to cut back on the amount each individual contributes to the country's growing landfills. Therefore, the trash indicator could be correct that there are still some underlying problems in our economic trajectory as evidenced by the discrepancy between economic growth and trash but it could also reflect the fact that products purchased by eco-consumers ideally last longer because they can be reused.
I am surprised Mr. McDonough mentioned Seattle. As a Seattle resident, my garbage has been reduced from what it was even just a few years ago - but not because of the economy. Not only do we have curbside recycle, and have had for decades, but we have food scrap composting. My garbage container is the 20 gallon size, lowered from 32 gallon size when Seattle Public Utilities raised their rates. And most weeks, we really could go with the 12 gallon size. Talking trash just ain't what it used to be. Though, that graph is pretty impressive.
While this may have been a good economic indicator thirty years ago, it has little value in today's marketplace unless it accounts for the increasing focus on recycling, reducing, and reusing materials.
Companies are increasingly looking to recovery, recycling, and repurposing to mine for increasingly scarce resources, improve environmental performance, and reduce costs. Large companies such as GM, Hershey, Xerox, Kimberly-Clark, and Clorox are converting facilities to zero waste to landfill, and companies such as Covanta Energy are contracting with municipalities to convert solid waste to energy—locally. Finally, consumer brands are reducing the amount of packaging materials they use and increasing their recyclability, again to reduce environmental impacts and costs.
Perhaps your format doesn't allow time for a nuanced discussion of these trends, but it would have been interesting and informative to have at least asked him how his model accounts for them.
Kathee Rebernak
Founder and CEO
Framework LLC
www.framework-llc.com
There are so many assumptions in this so-called proxy, not the least of which is the spurious nature of whether GDP is a real and valid indicator of wealth and prosperity. It is merely a throughput measure. The concept that consumption, and the companion waste it creates, was pitched in the interview, albeit subtly, as a "good" thing. The creation of waste is far from "good" for society, for the environment or the economy.
I found the interview incredibly frustrating as it neglected to address the possible implications of a society moving, thankfully but still too slowly, toward a more less wasteful future. The implications that the study neglects include the effects on the waste stream from collaborative consumption, re-purposing, downcycling, and as pointed out in previous posts, recycling.
No pun intended, but this research is rubbish and appears to be greatly flawed (although admittedly, I'm only going on the presented interview). What do we know about correlation? That is not necessarily causation. This kind of thinking is insidious and I'm disappointed in Marketplace for not digging deeper and challenging the assumptions.
Raising the question of GDP’s legitimacy as an indicator for wealth and prosperity is a valid argument and worthy of discussion. As a construction for measuring an economy’s strength and where that places a country in the world pecking order, I would say anyone who truly believes China’s economy remains smaller than the US is living under a rock. GDP remains the proxy for describing recessions, fiscal (I’m not sure this still exists) and monetary policy, business and consumer confidence, and so forth… it is also manipulated and susceptible to corrections.
I found the chart and discussion extremely interesting and the comments treating the relationship between trash and GDP as a one-off exaggerated. Further study of the recycling effect and possible backdating of the data would be beneficial, however; the data’s large divergence does suggest we could be in for an interesting time.
As rsj wrote, perhaps you should consider the effect of recycling as more and more municipalities turn to this as a way of making money. Instead of throwing their trash away, it is a lot more profitable to sell their trash to recycling companies, especially now that a lot of funding is being cut to local government. It would be interesting to see how that is affecting your chart if any, but I do agree that regardless of this trash indicator, all other indicators show we are in for another 2008 event.
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