Recycling and Exhaustible Resources

A previous paper (Smith, 1972) dealt with the economics of extracting an exhaustible resource when there exists a high-cost inexhaustible substitute technology which must ultimately become economical to operate in conjunction with primary extraction. Solar energy as an alternative to the recovery of fossil fuels and the recycling of material resources such as iron or copper as an alternative to mining represent examples under these assumptions. However, in the case of recycling, the model did not allow for the possibility that recycled output, and therefore cost may depend upon the floating stock of recyclable material. This turns out to be a particularly interesting and appropriate case, whose development will be the objective of this note. For additional analyses of the problem of recycling, the reader is referred to Smith (1974) and D'Arge and Kogiku (1973).