Do we need policy for a circular economy?

I was at the WRAP annual conference on Tuesday at which there was much discussion about the circular economy. I have spoken on this before and remain of the view that macro-economic drivers (in the form of global factor price equalisation) will drive some repatriation of manufacturing activity to Europe, but that it will be ongoing waste regulation (and not economics) that will drive the supply of secondary resources to those manufacturers.

All of the speakers on Tuesday were keen to stress the economic advantages to business of switching to a circular economy mindset. Mike Barry of M&S insisted that it was vital for businesses to adapt to this new model or else they would be left with a significant competitive disadvantage to those who had moved first.

Matthew Spencer of the Green Alliance outlined three key factors which are required for successful circular economic activity: (i) new business models; (ii) collection infrastructure availability; and (iii) either market drivers or policy in the absence of such drivers.

For me though, there seems little logical basis for policy intervention in this area. If there are strong market drivers then obviously the market will deliver a circular economy without government help. If however there aren't market drivers, then presumably there are also no underlying resource pressures which desperately need to be addressed. In which case, the justification for policy intervention disappears.

I know that policy intervention supporters will suggest that the pace of market change is too slow and that informational market failures exist which need to be fixed through regulation. But I disagree and believe that market participants are likely to be quicker than bureaucrats at identifying resource constraints. In the context of a hugely complex dynamic global economy, my view is that the market will deliver a better allocation of resources than governments.