Question

The city of Sunny Springs, Texas operates a sanitary landfill for use of its residents. The landfill has been in operation for 20 years and is nearing its original design capacity. The city council commissions a report on the feasibility of expanding the landfill by raising its height. Engineer Janie Jones, the city’s chief engineer, and Engineer Bruce Barnes, the lead engineer for the consulting firm of Barnes Consulting Engineers, have determined that the city’s new recycling program and applying for a permit to raise the height of the landfill by 80 feet will extend the service life of the landfill by at least 20 years. In the course of city council meetings to discuss the application for the permit to expand the landfill, two issues have come to light:

1. A nearby cattle rancher, Fred Farmer, contends that methane gas and leaking chemicals from the expanded landfill may permeate adjacent property.

Jones’ brother, Roy Roberts, operates a private garbage disposal firm that operates in Sunny Springs and the surrounding unincorporated county vicinity

Question#2

How should the issue concerning Mr. Roberts be dealt with, if at all

Answer 1

Externalities –whether positive or negative have to be necessarily calculated (or imputed) since production process involves not only the manufacturer but also other stake holders like consumers and the society at large.

In the given case study, the landfill has almost reached its maximum capacity and hence its necessary to look into providing alternative ways to dispose off the city garbage. One way was to expand the capacity of the existing landfill—this would involve a cost benefit analysis of the various costs involved in extending its capacity, the benefits to the society due to such a decision and so on . If the analysis depicts an outcome where the marginal social costs are more than the marginal social benefits then the landfill should not be expanded and an alternative method of garbage disposal must be discovered.

     However , if the marginal social benefits are more than the costs it is always a better option to expand its capacity since the city residents are used to dumping their garbage in the landfill and hence will find it convenient to do so in the future.

Mr. Fred Farmer’s contention about the leaking of Methane and other poisonous gases from the landfill and causing damage to the nearby property is a serious issue that cannot be ignored since it has direct and negative effects on the property values of the land owned in the vicinity of the landfill. The rental values of the property may also fall and this could lead to fall in rental incomes. It could also hamper the development of infrastructure in the nearby areas and thus could impede development.

     As an alternate solution , a gas treatment plant could be constructed though the gestation period (gap between investment and actual sales) has to calculated and the method of recovery of costs especially sunk (or fixed )costs has to discussed upon.

Mr. Roy Roberts’s private garbage disposal unit may act as a substitute to the existing landfill. The firm may benefit if the existing landfill’s capacity is not extended or at least until its capacity is extended and it is able to take in more garbage, Mr. Roberts’s firm can enjoy profits since many of the local residents will definitely want to dispose off their garbage even if the rate of disposal is slightly more . The unit being privately owned may operate with state of the art technology and strive for efficiency in its services though at a cost that is much higher than the Council owned landfill.

The unit can be monitored for its waste disposal methods though in the actual sense a decision should be effectively taken only after weighing the various alternatives available, their costs and their benefits and choosing that alternative which has the highest benefit -cost ratio.