Charity Bins

Throughout history, economists have attempted to put a new perspective on contemporary social issues that range outside the ‘normal’ scope of economics. For example, we can look at the work completed by Nobel Prize winners, Gary Becker and Kenneth Boulder, analyzing an array of topics from the behavior within family units to broader issues such as crime and discrimination. In the same manner, we apply economic principles to examine the problem faced by charitable organisations in providing donation bin networks and have a look at the incentives people face when using the charity bins.

A number of charitable organisations seek donations of specific types of used clothing and goods in resalable condition. The organisations provide a service to the community by maintaining a network of bins, sorting through the donated goods and recovering items for resale; these second hand goods may be provided to people in need or sold (at a relatively low price) to raise income for the charity to fund its activities. It is viable for a charity to incur the costs of maintaining the network of bins provided it can recover more from the items it salvages than it costs to collect them.

For a household, they face three alternatives when it comes to the disposal of unwanted items – they can sell the goods themselves, they can dispose of the goods at a rubbish tip, or they can donate the goods to a charity. It is attractive for households to donate their goods as the collection bins offer quick, easy and free disposal of unwanted items, as well as a sense of philanthropy. Furthermore, households save the time and money involved in bringing the items to a rubbish tip, and it also provides an easier alternative to selling the items directly (either by advertising online, hosting a garage sale and/or setting aside time to meet up with the buyers or to deliver items). In addition to the value that a household might place in providing goods to a charity, the availability of the bin network reduces its own costs in selling and disposing of goods.

While there is a win-win situation for both households and charities when all parties cooperate, because of a particular economic characteristic and nature of collection points we often witness a breakdown of the system. Firstly, although there are rules for using the bins in terms of what should be donated (usually written on the bins), these rules are hard to enforce and rely on the cooperation of the public. Secondly, the bins are ‘non-excludable’, that is, it is not possible (nor intended) to exclude any potential users. The system operates by social convention rather than a market transaction. This convention breaks down when people take advantage of charity bins by dumping garbage and unsellable items.

There are two common reasons for this problem occurring. On one hand, there are some people who know they are abusing the system and continue to do so, whether it is because they are lazy or they do not wish to face the costs of going to a proper dumping point. These people often get away with it because there are no enforceable property rights. On the other hand, other people may genuinely think they are helping charities, but in fact are dumping goods that are useless and have to be thrown away because there is a lack of awareness about what items are actually resalable and what are not. In either case, excessive dumping imposes additional costs on the charity, potentially to the point where it may no longer be profitable for them to maintain particular bins or in the extreme, the entire network of bins. It decreases the profit from this type of operation which in turn reduces the ability of charities to provide its services. In addition, the dumping can cause an eyesore for local neighborhoods.

Generally in economics, a working market system allows for the efficient allocation of resources. When a market process is unable to provide the best outcome for the community, there are four types of economic actions that can be used to target the problem – a price mechanism (via taxes or subsidies), government provision, creating property rights or regulation.

If the bins were to operate through a market process where there was a price paid for the disposal of the donated goods, this may act as a sufficient deterrent to exclude the illegal dumpers, thereby solving the dumping problem. A small compulsory monetary donation could be implemented, similar to a tax. For example, the bins could be designed to be coin operated. However, if this was a feasible solution then it is very likely it would already be in place. It is more likely that the idea of paying to make a donation would dissuade people who are correctly donating items in good working condition. Furthermore, it would not stop dumping in the area surrounding the bins and the people dumping would not face the full cost of their action.

The issue of property rights must also be considered. A property right refers to the ownership of a resource and the authority to determine how it is used. As the donation bins are already owned by the charities, the issue is to more clearly define and enforce these rights to ensure correct usage. For example, charities could have stricter signage at the bins which specify penalties for unwanted dumping, although it is questionable as to whether this would be effective. A more effective but costly solution is the installation of security cameras to monitor and record illegal dumpers, although to maximise effectiveness this would need to work in conjunction with a penalty or fine that is enforced (which involves further costs). Another approach is to extend the pick-up service some charities already provide for higher value, larger items, usually furniture or white goods. This service could possibly be expanded to smaller items and/or the charity could offer periodic collections, not unlike those charities that place bags in letterboxes for households to put items out on the footpath for collection.

These solutions, however, involve greater expenditure for charities and it would be up to each organisation to re-evaluate the true cost of operating the service (including the cost of the cleanup and monitoring). The problem also extends further, as the property rights of the charities do not necessarily extend to the area around the bins. An alternative is to remove the network of bins in public areas and limit donations to be made directly to the charity shop so that they are monitored, however this would eliminate the benefits provided by ready, twenty four hour access to a network of bins that are conveniently located.

Government provision of the collection points does not appear to be a feasible solution, as it is unlikely that they would be able to provide the collection points any more efficiently than a charity. It also complicates the process as a third party would operate the donation bins and then supply charities with goods for resale.

However, the government already has a role in the provision of collection/disposal of unwanted goods. Currently, tip vouchers are included in rate notices each year (reducing the cost to households of disposal) and neighborhood kerbside rubbish collection is provided periodically. This indicates that there may be a greater issue at hand – people are not aware of the alternatives for legal rubbish disposal and/or the council may not be providing enough disincentives (incentives) for illegal (legal) dumping.

A possible solution is to further the government provision of waste disposal services, for example by providing more regular kerbside pickups or by making rubbish tips less costly. To complement this, government also potentially has a role in regulating and enforcing the property rights of charities and also raising awareness of the problem. As the Brisbane City Council already has on the spot fines ranging from $220-$1760 depending on the amounts of dumped waste, the solution may lie in being more vigilant in catching and enforcing penalties on illegal dumpers. For example, the government could bear the cost of installing cameras at bin sites, rather than leaving the onus of monitoring on charities. The government also potentially has a role in information provision and awareness raising, for example via advertising and education campaigns. This could assist in a number of, including providing information to the community regarding:

• the standard of goods that are acceptable for charitable donations
• the alternatives available to households to dispose of rubbish and where they are located
• the consequences of illegal dumping, including the cost this currently imposes on charities.

On the whole, we need to make it more attractive and convenient for people to dispose of their rubbish legally and less socially acceptable and more costly for them to dump at charity bins.

Economics looks at the behaviour of individuals and identifies options that will change this behaviour – in our scenario we are looking to deter and provide disincentives to illegal dumping. We have found that a price mechanism does not adequately deal with the problem and that taxes face the same problem of deterring genuine donators. Furthermore, enforcing property rights and monitoring collection points are costly activities for any charitable organisation, and some individuals may be happy to bear the risk of continuing to dump unwanted goods because it is simply more convenient than legal dumping. As a result, the best solution may be to look to the government and regulation to deal with the problem. Although there is already a regulatory framework to deal with illegal dumping, it appears that more vigilance is needed in enforcing fines, which needs to be complemented by effective monitoring (for example the installation of cameras at bin sites). Government also has a role to play in encouraging legal waste disposal through raising awareness and providing more rubbish pickup services. By imposing costs on illegal dumpers without discouraging those who are making donations, as well as minimising the costs faced by charities, enforceable regulation may result in the optimal solution for all parties.