The Economics of Sawdust

by on June 2, 2008 at 7:57 am in Economics | Permalink

I was in Vermont over the weekend and talking to a dairy farmer about the rising price of milk.  I was surprised when she said that higher sawdust prices was one of the causes.  Sawdust?  Sawdust, it turns out, is used for bedding the cows and the price of dust has doubled in the past year.  I surmise that the downturn in housing construction has meant a reduced demand for lumber and thus less sawdust.

The connection between the housing market and the milk market is an interesting example of the dense connectedness of markets, "general equilibrium" in the language of economics.

The economics of sawdust also reminds us that the capitalist production system minimizes waste – entrepreneurs search out ways to extract the most value from every input and from every output.  Thus even sawdust, as trivial a waste product as one could imagine, is turned into an input into milk production as well as into particle board, fuel nuggets, mulch and other useful products.

Addendum: The WSJ has more on sawdust.

1 Andrew June 2, 2008 at 8:11 am

Similarly, I remember a news segment on the shortage of corn cobs a while back (yes, the cob minus the kernels). I suppose as demand for ethanol booms we’ll have a corn cob surplus. Maybe it’s really the corn cob lobby driving that.

2 Speedmaster June 2, 2008 at 8:46 am

I remember once learning that Henry Ford used the wood from crates that held engines shipped to him, as floorboard materials for his early cars. I can’t vouch for the veracity of the tale, but it was told to me in high school. 😉

3 RCinProv June 2, 2008 at 9:16 am

The capitalist system minimizes waste…when it is “worth” it to do so. But wasteful, extravagent packaging is sometimes also “worth” it, if poeple are willing to pay for such waste.

4 John Ur June 2, 2008 at 9:19 am

Is there no substitute bedding for cows? And also, has the price of lumber risen? Besides the downturn in construction, I would think higher wood prices would increase the price of dust.

5 David Zetland June 2, 2008 at 9:53 am

They should use cow waterbeds

6 Brutus June 2, 2008 at 10:01 am

Did this rugged individualist also tell you that he has little to worry about because the dairy industry in New England is a legal cartel with milk prices set by the New England Dairy Compact?

7 paul June 2, 2008 at 10:27 am

“the capitalist production system minimizes waste”

Flame-bait?

What a ridiculous overgeneralization from an otherwise interesting story.

8 John Dewey June 2, 2008 at 10:44 am

Shunyata Kharg: “which very often means convincing the consumer to buy something she either doesn’t really need or already has.”

How do you determine that a consumer ever buys something she doesn’t really need? Obviously, if the consumer paid for an item, she did so because she believes the item is meeting some need. Do you mean that consumers buy items which you don’t believe they need? Do you believe that central planners and not consumers should determine which items are “really needed”? Do you believe that comsumers are just stupid and need to be protected by dictators?

In 57 years of living in the U.S., I never remember our supermarkets not having such essentials as meat or toilet paper. Can the same be said of centrally planned economies? The 20th century evidence is very clear. Capitalism meets the needs of its people very well. Socialism cannot.

9 Johan June 2, 2008 at 10:53 am

At least in Europe, timber mills have started to burn saw dust as fuel in order to help dry the lumber. As price of other sources of energy goes up, this option becomes more and more attractive.

In addition, as Tom points out, the transportation costs to get the saw dust to the farmers are also increasing.

10 David R. Henderson June 2, 2008 at 11:11 am

Dear Alex,

The other thing to note, since this is an economics blog, is that beyond the normative issue of waste, is the positive issue: this is a classic joint-supply, mutton-and-wool problem. The demand for one of the items jointly supplied falls and, therefore, the price of the other item rises. If any of you read the Marshall Jevons novels, you’ll recall that understanding joint supply is one of the keys to spotting the villain in one of the novels.

Best,

David

11 Nunca June 2, 2008 at 11:57 am

Careful, the word “waste” is one of the holy words for the anti-capitalist watermelon crowd.

12 RCinProv June 2, 2008 at 12:29 pm

First, assume a can opener — I mean, assume no waste. You are so lost in your assumptions that, by definition, there is no waste. Ok, fine, but please don’t pretend you have “proven” anything other than your assumptions! People are willing to do all kinds of wasteful things when they don’t have to pay the true cost. I gather that if one finds externalities to be a problem, you think they are reading the “wrong blog.”

13 John Dewey June 2, 2008 at 1:36 pm

Shunyata Kharg: “I am simply pointing out that without a continuous supply of demand in the form consumer “needs” then capitalism would quickly grind to a halt.”

Sorry, but I don’t understand this statement at all. If demand for goods and services did not exist, why would any economic system exist in the first place. What point are you trying to make? Do you believe that capitalism can only survive if demand for goods and services grows? Why would you think that? Further, you seem to be focusing on material goods. Capitalism is not just an economic organization of material goods.

Shunyata Kharg: ” I think it is becoming quite clear that the planet itself cannot afford to maintain its entire population at the material level of those who live in “developed” countries”

That is certainly not clear to me. If you had written:

“the planet does not have sufficient fossil fuels to maintain the population at the level of developed countries using existing technology”

perhaps I could agree. But why would anyone believe that alternatives to fossil fuels will not be available? Why would anyone believe that the resource-efficiency of current technology will not be improved? Why are you so pessimisstic about the ability of the human race to continue improving its standard of living, just as it has done for many centuries?

14 dearieme June 2, 2008 at 2:35 pm

If you’re using sawdust as bedding, I can only conclude that you must be short of bracken and heather.

15 sort_of_knowledgeable June 2, 2008 at 4:45 pm

In Euorope many homes are heated by heat from electricity or other industrial production that would otherwise go to waste. Central planning minimizes waste.

16 Tracy W June 3, 2008 at 3:55 am

I guess it depends on how many things one considers a person needs to survive.

Why would anyone merely want to survive who had the option of doing more with their life? In what country and in what time period do people have no aspirations beyond mere survival? Throughout human history people have done more than merely survive, and indeed throughout pre-history. We know from archeology that people made beautiful objects and decorated jewellery, pots, etc. Pre-historic people (in the sense of before written history) constructed massive monuments like Stonehenge or the statues on Easter Island. All around the world people do more with their lives than merely survive.

I think it is becoming quite clear that the planet itself cannot afford to maintain its entire population at the material level of those who live in “developed” countries and in that sense alone Capitalism is not beyond criticism (as no system is).

But when you criticise capitalism, it’s much more informative if you compare it to some other real system, or at least a specific theoretical system, not some mysterious utopia in which all the problems that plague real world economic systems are just assumed not to exist.

In Euorope many homes are heated by heat from electricity or other industrial production that would otherwise go to waste. Central planning minimizes waste.

In the USA many factories use a generator to produce both heat and electricity, both of which are used within the factory.

The use of heat from power plants versus the use of individual boilers for heating houses depends on the relative efficiency of moving gas to people’s homes and then producing heat versus producing heat and then moving it to people’s homes. Which is more efficient depends on matters like population density and where the power plants are built. I have not seen any calculation of which is more efficient overall.

17 Tracy W June 3, 2008 at 7:14 am

What you refer to falls into the latter category, in my opinion. Of course, “spiritual” advancement may use material objects, but doesn’t necessarily do so.

I’m not sure what your point is. Do you agree that as far as we know everyone wants to do more than merely survive?

And do you agree that as far as we know, every culture everywhere and at every time has used physical resources for purposes other than those that are necessary for pure physical survival?

I don’t think it’s very relevant to the argument to say that resources are being used for spiritual advancement rather than physical survival. There are plenty of people in this capitalist society selling resources on the basis that they will assist in spiritual advancement – visit your local New Age shop if you doubt me.

Criticism is not a necessarily a comparative exercise. If it were no new systems, be they economic or explicative physical theories, could be constructed. Criticism should never be bound by axiomatic dictums, such as only being valid in a comparative context. Nothing is beyond criticism.

I didn’t say that it was impossible to criticise without offering an alternative. I said it was not informative. I don’t see much value in saying that capitalism isn’t perfect – any idiot can say that regardless of whether it is true or not. It’s much more interesting if you say that “capitalism is worse than communism” or “capitalism is worse than anarchism”, or “in the modern USA we have this feature, while feudal societies got along perfectly well without it”. Then we can have a decent argument. “Rent to Own”‘s criticism would have been far more informative if they had provided an example of a country or a realisable system that they claimed did not display those features.

And I note that if nothing is beyond criticism, then criticism itself is not beyond criticism.

18 Tom June 3, 2008 at 10:00 am

Spencer:”I remember fuel prices doubling, but I sure do not remember them falling by a third.

What did I miss?”

http://tonto.eia.doe.gov/oog/info/wohdp/diesel.asp

Diesel went from 3.05 to 2.40 the last half of 2006.
Down 20%. It was obviously not the only factor, but probably the dominant.

19 Shunyata Kharg June 3, 2008 at 11:43 am

Tracy W: So we are agreed then. Every society, capitalist or not, does things for purposes other than merely physical survival.

The point is that physical survival necessarily entails a fundamental requirement of material goods, whereas what I described as “spiritual” advancement does not. Material goods are not a fundamental requirement for activities over and beyond physical survival.

Tracy W: Well, the fun thing is that when one side tries to dictate the terms of communication, for example by saying Criticism should never be bound by axiomatic dictums, such as only being valid in a comparative context., then you can argue back, and criticise their attempts to dictate the terms of communication.

So you see me as dictating the limits of conversation when I was trying to remove other bounds you had imposed on words I had used. Imagine somebody said to you, “all limits have been removed”; would you then complain about these (now non-existant) limits restricting you?

Tracy W: You can make grand statements about criticism, but that does not bind me in any way, and vice-versa.

I have no intention of either binding you or myself to anything.

Tracy W: Incidentally, what response do you think is appropriate to things like Rent To Own’s statement about positive feedback?

From my experience it is clear that when one focusses on something in a concentrated manner, one loses some of one’s peripheral vision.

20 Tracy W June 4, 2008 at 4:27 am

The point is that physical survival necessarily entails a fundamental requirement of material goods, whereas what I described as “spiritual” advancement does not. Material goods are not a fundamental requirement for activities over and beyond physical survival.

That’s your point. My point is that every society that we know about, capitalist or not, uses goods for reasons other than mere survival. It is not necessary for physical survival to decorate pots, to decorate clothes, to bury physical items with the dead, to paint cave walls, to build massive stone monuments (Stonehenge, the pyramids, the Easter Island statues), etc. Yet every society we know of does things like this. Therefore using material goods for things other than physical survival is a feature of humanity as a whole, not of capitalism in particular.

So you see me as dictating the limits of conversation when I was trying to remove other bounds you had imposed on words I had used.

No. I saw you as *trying* to dictate the limits of conversation. As I stated above, attempts by one side in an Internet debate to dictate the terms on which communication can take place are rather ineffectual, so I don’t see you as dictating.

I don’t know what you mean about me imposing bounds on words you had used. How can I impose bounds on the words you use? I don’t even know where you live, so I can’t have been coming by your house and threatening you if you use them in ways I disapprove of (and if I did, you could call the police). If you think I have imposed bounds on the words you use, surely the simplest thing is just to ignore those bounds? Don’t try, just do!

I have been repeatedly saying that criticising capitalism without proposing an alternative is not informative. You haven’t engaged in this debate at all, instead you’ve gone off on this tangent about everything being open to criticism, and your idea that I have mysteriously managed to impose bounds on the words that you use. You haven’t said anything that would convince me that criticising capitalism without proposing an alternative is actually informative.

21 Russ Nelson June 4, 2008 at 10:07 pm

In Europe many homes are heated by heat from electricity or other industrial production that would otherwise go to waste. Central planning minimizes waste.
If it’s economic to minimize waste, then somebody will start a company to do it, even if that means coordinating the output of multiple industries. On the other hand, if it’s wasteful to minimize waste, then in capitalist society you will have waste; just less of it. If you centrally plan, then you don’t have prices, which means that you’ll never know whether it’s more wasteful to waste or more wasteful to reuse. Which is exactly Alex’s point.

22 環保袋 December 9, 2008 at 2:15 am

New homeowners are most concerned about leaks, someone to 抓漏grasp Henmomianzai leakage, a good new home, can not find a good 清潔公司cleaning company to clean up clean. That day I had bought a 機票ticket in Paris, a house was found leaking in the morning, quickly hit a 租車taxi to find out who repair, really bad

23 discount christian louboutin shoes August 17, 2010 at 4:22 am

That is a idea, I am agree with the opinions of this articles about

24 dog treats December 13, 2010 at 8:54 pm
25 ED Hardy January 6, 2011 at 12:48 am

djI’ve been looking everywhere for this! Thank goodness I found it on Bing.Thx

26 Business Cards February 10, 2011 at 4:40 pm

Yes, everything is connected. Like an economic food chain! Good read, thanks for the post.

Thanks,
Brad
Calgary Tree Service
Furnace Replacement
Labrador Puppies

27 thomas sabo March 9, 2011 at 2:41 am

ed the list, especially #8. I’d love to have an agent like that.

Comments on this entry are closed.

Previous post:

Next post: