Rational Economic Behavior - Can This Prove Reliable as a Metric?

Thu, Apr 10, 2014 - 12:46am

Here in California, one is barraged with idiocy, constantly and incessantly. If one steps back from the managed news, and asks critical questions, it even becomes comical, of not enjoyable, to see the simple human condition in its perfect, rational form befuddle the central planners.

So here is one I took notice of, and specifically because I wonder if this data can be useful as an economic barometer, a metric?

And by "this data" I mean recycling rates.

This story caught my attention: https://www.sbsun.com/general-news/20140408/man-gets-6-month-sentence-fo....

See, here in The People's Republik of Kalifornia, the central planners have overrun the place. Even corrupt politicians are the norm, as are voting blocs of free shit army members, which create impossible conditions for any real change to occur. So, central planning progressives run the show.

One such feel good, environmentally sensitive program that the liberals implemented was the recycling program which was intended to encourage recycling of aluminum cans and plastic bottles. This scheme created a revenue stream to the state whereby beverage distributors paid a tax on every single container, which the retail customer absorbed at the time of purchase (called a CRV, which today is 5 cents per container for small ones, 10 cents for large ones). The retail customer could get the CRV refunded only by returning the used container to an authorized recycler.

Naturally, a huge bureaucracy arose to administer this program, to write rules, to enforce them, to impose fines, and as the recent article shows, to imprison people who act rationally, although in unintended ways by the central planners. See, the central planners have no clue of normal, rational economic behavior. No, they study models, and theory rather than reality.

In any event, it is an easy analysis to conclude that the beverage recycling laws created an enormous incentive to cheat. The article discusses one such scheme. There are others in the news stories, some of which are collected here: https://www.calrecycle.ca.gov/NewsRoom/2014/04Apr/12.htm

If one wants to explore the thinking behind the program, go to this page and read up on an analytical piece, here: https://www.calrecycle.ca.gov/Publications/Documents/BevContainer/201102...

What caught my attention was not the simple incentive structure that the progressives created. What caught my attention was usefulness of the program's data in tracking, in real time, the connection between recycling rates, the payment structure, and the general economy.

As economic conditions deteriorate, one would imagine that recycling rates would increase as a percentage of sales, because more people would tend to recycle to get the CRV rather than throw the containers away. Here too, one would anticipate a higher rate of fraud, given that the economic conditions likely lead one to provide for one's family in more, say, "non-traditional" means.

So, I am not surprised to see the recycling rate increase as economic times have steadily gotten worse since the California housing bubble burst. More controls have been placed on the program, too, such that fewer containers can be recycled per person, per day, etc.

I also have a request: can one of you wizards create a graph that tracks the recycling rate with the officially reported California unemployment rate?

Finally, I end with this. I find it comical that the central planners think they can outsmart the human condition. One need only look at the incentive structure to realize that subsidizing behavior only leads to more of it! Look around and learn to really understand the incentive structure. Match the incentives with human nature, and the outcome is easy to predict.

About the Author


Apr 10, 2014 - 1:08am



Apr 10, 2014 - 1:14am

Came in 2nd

but first in short term trading today.

On to the CL goods.

Apr 10, 2014 - 1:19am


Thurd? No freaking way, my first thurd!

Oh, did somebody write something?

Apr 10, 2014 - 1:30am


In California the R party are pretty stupid and would rather be ideologically (and racially) pure than hold other than a token number of legislative seats in the State legislative bodies, so the state is run by corrupt D's.

Apr 10, 2014 - 1:47am

Also the trend

small to medium sized biz has slowly escalated,moving their ass off Kalifornicaton turf and relocating in Puerto Rico.Why, 4 percent tax vs a marginal tax upwards of 50% when you combine the state income tax with the federal income tax, so income tax liability goes down by upwards of 90%.

Apr 10, 2014 - 2:04am

California recycling

About 10 years ago we went spent some time in SoCal in our motor home. We had become accustomed to recycling all our aluminum cans here in Canada, where one simply returned them to the store of purchase.

Well, we accumulated a huge number of cans but could never discover where to take them being unaware of authorized recycling centers. Fortunately one day we saw two men with a car from the 60's carefully checking bins for cans who were only too happy to take the accumulation off our hands.

It always fascinated me that different states had different refund rates and I wondered about cross border movement but am surprised to learn that interstate transportation of empty aluminum cans is a felony.


Apr 10, 2014 - 2:37am

Doesn't anybody sleep?

Doesn't anybody sleep around here?

So let me get this straight. Government says - "we will pay you for your garbage". Eventually they change their tune to "stop bringing us so much garbage".

I would NEVER have seen that one coming. I wonder what would happen if someone came up with a program that pays girls to have babies, or one that pays people to not work?

Apr 10, 2014 - 2:59am

$1.2 bln fund

now you know the truth, they really don't want you recycling anything, that's their hooker and blow fund

El Gordo
Apr 10, 2014 - 4:25am

I remember the good old days...

...when government used to at least make an effort to disguise its fraud, waste and abuse. Now days it seems it just up front about it, but since the populus is either dumbed down enough not to recognize it, or is just willing to accept it is still unclear. Eventually when utopia is reached and no one is working any more to pay taxes, we can all just run in the candy forest chasing RFU's (rainbow farting unicorns) and eating the marshmallows that they poop. Can't wait.

Gold Dog
Apr 10, 2014 - 5:26am

I'm a "10"

Woke up and saw that gold futures were way overbought, Wilders RSI at +80 and decided to grab some fiat to turn into money.

We retired people find it normal to make a pot of coffee at 2:30 am, I can finish sleeping at noon if I feel pooped out later.

Spent yesterday with the accountants and I feel like the Beatles song "we'll even tax the pennies on your eyes!"

If you tax it you will get less of it, if you subsidize it you will get more.

Your friend,


Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

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Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

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