Indivisibility

No, there are positive marginal production costs for all components of the MSW system. However, there are dramatic scale economies in the disposal component which make short-run marginal costs small (USEPA Office of Solid Waste Management 1995). This is in part due to high fixed costs associated with the start-up and shut-down of landfills and incinerators. In addition, landfill capacity increases with the volume of the site, whereas operating and environmental protection costs increase with its surface area. Thus large landfills thrive in an era of more stringent environmental protection, just as large mammals like whales and polar bears thrive in cold climates, because surface area-to-volume ratios decrease as size increases. Support for this relationship is evident in the order-of-magnitude drop in the number of open landfills over 20 years without a corresponding loss of national disposal capacity (ibid.). Modern incinerators equipped with air pollution control and waste-to-energy conversion equipment also enjoy significant scale economies, with the economically optimal size currently in the 1200 tonnes per day range (ibid.). At the present US average MSW generation rate of two kilograms per day per person (USEPA 2000), such an incinerator should serve the needs of 600000 people. That is more than reside in most municipalities and many counties. By contrast, the collection and processing components of the MSW management system appear to enjoy fewer scale economies, although collection enjoys economies of contiguity (see below). A result is conflict between collective decision-making mechanisms: the marketplace would like to organize disposal differently than would local governments. The trend towards regional disposal facilities reflects government's belated interest in the scale economies.

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