The Latest Alternative Metric: Your Trash?

By now, regular readers know how we feel about the reliance on GDP as the main economic indicator and its inability to measure our economic and social well-being. Alternative indicators that can provide more of a complete picture include the Genuine Progress Indicator, the Inclusive Wealth Index, and now maybe your trash.

Brad Plummer at WonkBlog details the work of the economist, Michael McDonough, who has focused on a GDP-to-trash indicator. As McDonough explains, the GDP-to-trash indicator looks at all parts of the economy ranging from what people personally discard to construction waste and through looking at the amount of waste produced, one can see how strong or weak the economy is.

As seen below, waste carloads track fairly well with GDP.

Intuitively, the waste indicator makes sense. In difficult times, people are prone to conserve more and waste less. The recent economic downturn hit the construction industry particularly hard so there would be less building demolition waste and less construction waste, hence the big dip down in 2009. Arguably, this graph also indicates that the stimulus was successful given the big jump between 2009 and 2010 in waste production signifying more construction and less of a personal need to conserve.

The graph also indicates that we may be in for some bad economic news in the third quarter of this year. It’s possible that increased recycling efforts could reduce the amount of waste being trucked off or that we’ve reached “peak stuff,” where once people reach a certain level of economic activity, they stop buying so much stuff. However, it seems unlikely that either of these trends would pick up so significantly in just the third quarter. More likely, we should brace ourselves for what seems like will be a rather big downturn.