Industrialization spurred demand for affordable materials; aside from rags, ferrous scrap metals were coveted as they were cheaper to acquire than was virgin ore. Railroads both purchased and sold scrap metal in the 19th century, and the growing steel and automobile industries purchased scrap in the early 20th century. Many secondary goods were collected, processed, and sold by peddlers who combed dumps, city streets, and went door to door looking for discarded machinery, pots, pans, and other sources of metal. By World War I, thousands of such peddlers roamed the streets of American cities, taking advantage of market forces to recycle post-consumer materials back into industrial production.
Fiscal efficiency is separate from economic efficiency. Economic analysis of recycling includes what economists call externalities, which are unpriced costs and benefits that accrue to individuals outside of private transactions. Examples include: decreased air pollution and greenhouse gases from incineration, reduced hazardous waste leaching from landfills, reduced energy consumption, and reduced waste and resource consumption, which leads to a reduction in environmentally damaging mining and timber activity. About 4,000 minerals are known, of these only a few hundred minerals in the world are relatively common. At current rates, current known reserves of phosphorus will be depleted in the next 50 to 100 years. Without mechanisms such as taxes or subsidies to internalize externalities, businesses will ignore them despite the costs imposed on society. To make such nonfiscal benefits economically relevant, advocates have pushed for legislative action to increase the demand for recycled materials. The United States Environmental Protection Agency (EPA) has concluded in favor of recycling, saying that recycling efforts reduced the country's carbon emissions by a net 49 million metric tonnes in 2005. In the United Kingdom, the Waste and Resources Action Programme stated that Great Britain's recycling efforts reduce CO2 emissions by 10–15 million tonnes a year. Recycling is more efficient in densely populated areas, as there are economies of scale involved.
The recycling of waste electrical and electronic equipment in India and China generates a significant amount of pollution. Informal recycling in an underground economy of these countries has generated an environmental and health disaster. High levels of lead (Pb), polybrominated diphenylethers (PBDEs), polychlorinated dioxins and furans, as well as polybrominated dioxins and furans (PCDD/Fs and PBDD/Fs) concentrated in the air, bottom ash, dust, soil, water and sediments in areas surrounding recycling sites. Critics also argue that while recycling may create jobs, they are often jobs with low wages and terrible working conditions. These jobs are sometimes considered to be make-work jobs that don't produce as much as the cost of wages to pay for those jobs. In areas without many environmental regulations and/or worker protections, jobs involved in recycling such as ship breaking can result in deplorable conditions for both workers and the surrounding communities.
Both minimum recycled content mandates and utilization rates increase demand directly by forcing manufacturers to include recycling in their operations. Content mandates specify that a certain percentage of a new product must consist of recycled material. Utilization rates are a more flexible option: industries are permitted to meet the recycling targets at any point of their operation or even contract recycling out in exchange for tradeable credits. Opponents to both of these methods point to the large increase in reporting requirements they impose, and claim that they rob industry of necessary flexibility.