2 January 2019

Plastic bags and the problem with central planning


Frederick Hayek explained better than anyone just how difficult it is to plan an economy. Those with plans to banish plastic bags are discovering that doing so means using more plastic.

In his Nobel Lecture, The Pretence of Knowledge, Friedrich Hayek told us that it was never going to be possible to centrally plan an economy for economies are big, complex, even chaotic, things. That centre can never gain enough information in real time to be able to make decisions which bear much relation to reality. We can also run his logic backwards, if we do insist upon planning then we can only have a simple economy – all the knowledge we have allows us to plan – and simple economies are poor ones with poor people in them. Planning and poverty or market chaos and wealth: take your pick.

This point is illustrated in microcosm by those trying to get rid of single use plastic bags. The 5p charge for plastic bags has meant  the sale of billions of so-called bags for life, which use twice as much plastic as the cheaper alternative. All those bags for life mean we use more plastic than we started with and even, possibly, more bags themselves. This was something that was warned about before the plastic bag charge was introduced, with some observing that even “single use” bags did tend to get used more than once.

So far, then, we have learnt that the planning deployed to reduce plastic has had the opposite effect. That, however, has not stopped the central planners from redoubling their efforts. The necessary charge for a bag is to double, the system is to be expanded to the tens of thousands of small shops that don’t currently have to charge. “It doesn’t work, let’s have more of it”, the cry of bureaucracies through the ages.

But this is the blending of government planning with the fashionable nostrums of our day so of course it gets worse. It’s not even true that the bags for life – and especially not the cotton ones, even less so the organic cotton – are more environmentally friendly than the single use ones. Even recycled ones use more resources than single-use ones – for yes, recycling is an industrial activity using energy and other resources.

We can even construct a little spectrum here. How many times do we need to reuse a bag for it to have as little resource use – and thus environmental effect – as just the one use of those thin single use plastic ones? Obviously enough, the single use that we’re told not to use has a value of one here. The bag for life must be reused 35 times. A bag for life from recycled plastic 84 times. A paper bag must be reused 43 times – yes, paper. A cotton bag 7,100 times and an organic cotton? 20,000.

Which is the environmentally friendly option here? Clearly and obviously the one that everyone insists we must not use. So much for fashionable nostrums then.

It’s also true that we did in fact know this. The Environment Agency released a paper saying much of this in 2011. A Danish official paper confirmed it in 2018. Even a paper purporting to support the change states that a bag must be used for five years to be truly as environmentally friendly. Still, we are told that more must be done to stop us from using the least damaging type of bag.

This means that we’ve got to at least seriously consider another point Hayek made. Which is that we’ve only got the one calculating engine good enough to chew through the problems that are beyond the planners: the economy itself and the price mechanism.

It may be true that not everything is included in the price system; those things that aren’t we call externalities. CO2 emissions from the burning of fossil fuels are the most obvious current example and worry. But it’s also true that the resources used in the production of something are reflected in the price of it. Things which use more resources are more expensive.

So, we’ve varied forms of bag which can be used to carry food home. One is so cheap that people are willing to give them away, others so expensive that only the most determined hipster would purchase one. We’ve a really very good guide to overall resource use here, don’t we? One which, amazingly, maps precisely and exactly over our detailed studies of the environmental impact and resource use of different types of bag.

All of which is such an interesting little guide to what we should be doing in 2019. Prices work as a guide to resource use, let’s use prices to reduce environmental impact – by using whatever is the cheapest solution to our problem.

Tim Worstall works for the Adam Smith Institute and the Continental Telegraph.