Tuesday, March 19, 2013

E-Waste and International Gains to Trade in Used Durables

The New York Times has a piece focused on warehouses filled with old computers and televisions.  The interesting economics here relates to product cycles. In the old days before "flat screen TVs and Computers", this e-waste could be profitably recycled into new televisions and computers that would be sold to households.  Now that households don't want the old versions of these products the demand for these defunct materials is low and they now sit in inventory in these toxic warehouses.  The NY Times is worried that a new type of Superfund site could be created as the owners of this now worthless asset may walk away or illegally dump this stuff.   Given that these defunct machines have lead and mercury and other chemicals in them, their improper disposal could cause serious social costs.

International trade in used durables offers a solution here. Lucas Davis and I studied international trade in used cars in this piece.    I am not proposing the usual "pollution havens" trade that we send our toxic waste and $ to some unsuspecting developing country.  I am proposing that if we sent our e-waste to a developing country that enterprising entrepreneurs there could figure out how to repair these things and this would allow the middle class in these countries to have access to cheaper computers and televisions.

A Chicago economist might ask; "If your international trade idea is so profitable, why is there waste in the California warehouse?"   A lazy answer is that there are transportation costs and transaction costs for getting this business up and going.   If warehouses had to pay a "holding cost" for allowing inventories of e-waste to just sit around then this would incentivize them to find a trading partner to take the waste and convert it back into being a usable consumer product.