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New Toronto trash service offers higher incentive to cheat

In caring, kind Toronto, if you want your garbage picked up, you need to place it in city mandated grey bins or you need to have it labelled with city-issued garbage tags.  If neither of these is done, you can’t expect your trash to be collected.  Additionally home owners must pay according to the volume of trash that they throw out.

Since the city instituted all of these changes, making a fairly simple process excessively complex, there seems to be a lot of cheating going on.  This is partially because many people have not yet received their city-mandated bins nor their extra-special garbage tags.  In spite of the delays a garbage police squad of 44 are already on duty - with another 15 coming - ready to make examples of garbage flagrancy. And through all this many residents have not had their garbage picked up for weeks because they’re not in compliance since they have not been given the equipment required.

There are couple of interesting economic lessons to be culled from this situation:

1. When a public good, like trash pickup, is suddenly changed to user-pay you will likely get cheating unless you can solve the free-rider problem (getting the benefit without paying).  The city is attempting to do this through a combination of negative incentives, including, not getting your trash picked up if the trash isn’t suitable.  The problem is the process creates a negative externality in a surfeit of uncollected trash that will affect the quality of life of those living near the uncollected trash.  In turn the city has hired a team of 59 garbage police to fine those who are relatively indifferent to trash piles - those without much of a reciprocity motive.
2. The city of Toronto has gone forward with this change assuming (or at least that’s how it seems) that the demand for garbage pick-up is highly inelastic.  Meaning that they thought that a perceived price increase from zero (adequately hidden in property taxes) to something other than zero would not significantly alter behaviour.  What they haven’t adequately examined is what the substitutes for trash pickup are: trash hoarding, transfers between collaborating neighbours, illegal dumping (in ditches to Home Depot bins) and of course illegal burning.  Even the Toronto manager for waste enforcement alludes to the idea that increased trash in public areas is due to onerous regulations, yet he seems dumbfounded that it’s happening.
3. Since city administration do not have clear incentives to serve the citizens of their burg, such things as inefficient delivery of services related to newly passed edicts are not high on the list.  This will clearly exacerbate cheating.

As Tyler Cowen writes in the Public Goods article at the CEE:

Private means of avoiding or transforming public-goods problems, when available, are usually more efficient than governmental solutions.

This leads to the primary point of this article.  The best method of solving this problem, through reduced costs and more efficient service, would be to privatize trash collection - have home owners contract removal with the company of their choice. This will present people with a truer price for the amount of trash that the generate since the company that removes it will have to charge enough to cover costs of landfill creation, transportation and potential future liabilities.

There will still be problems with this solution as there are those that will not pay for trash removal, again creating negative consequences for their neighbours.  These people can easily be dealt with under existing littering and nuisance laws, without the need for specialized trash inspectors.

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