The Fantastic Power of Incentives

If you live in India, then there is a good chance that you will see garbage piling up everywhere. But if you closely observe , you will not find any PET / Plastic bottle in that garbage.  I challenge you to find plastic bottles in garbage heaps.

What’s the reason? Is it Swatch Bharat Abhiyaan? Is it work of some NGO?

Nope.

The answer is Simple, Plain “Economics”.

I got to know about this fascinating thing in the year 2009-2010.

It was a time when I was contemplating  getting into manufacturing business. Someone suggested getting into PET bottle recycling. The idea sounded interesting, so we decided to dig into it.

I traveled whole Rajasthan , sat in garbage dumps, picked brains of Kabadi -wallahs, traded 250 KG of Plastic trash.   And that was when I discovered this amazing economic chain.

In last couple of decades a huge recycling industry has developed which converts waste PET bottles to fibers.  It has resulted in creation of  completely new economic chain , where the rag picker collects the bottles, supplies them to the local kabadi and the kabadi in turn packages and sells the bottle to the recycling companies.  The recycling companies converts the trash to fiber which is then sold in open market.   Everybody in the chain makes money, right from the rag picker to the corporate recycling the bottle. No social awareness campaign was needed, no selfless service was needed. All it needed was an economic incentive. India now recyles 90% of the PET plastic it uses. Here is the link to the article

Human beings work best when they have an incentive. I believe that majority of social problems can be solved if they are structured in such a way that solving them provides an economic incentive. That is why the concept of invisible hand is so powerful and that is why capitalism is so successful.

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