Linear economy

What Is Linear Economy?

The linear economy is a traditional economic model characterized by a "take, make, dispose" approach to resource management. In this system, raw materials are extracted from the Earth, transformed into products, used by consumers, and then discarded as waste at the end of their product lifecycle. This unidirectional flow of resources poses significant challenges related to environmental degradation and the depletion of natural resources. The linear economy assumes that resources are infinitely available and that waste can be absorbed without long-term issues.⁵⁵

History and Origin

The framework for the linear economy was largely established during the Industrial Revolution.⁵⁴ Before this period, economic activities often exhibited characteristics closer to circularity, where materials were routinely recovered and reused out of necessity.⁵³,⁵² However, the advent of mass production, driven by technological advancements and the availability of cheap energy, led to a shift towards a system where goods could be produced in high volumes and at lower costs.⁵¹,⁵⁰ This fueled a culture of disposability, as the perceived abundance of resources and the limited awareness of the long-term environmental consequences made discarding products seem efficient.⁴⁹ The linear economy became the dominant business model throughout most of the 20th century, enabling significant economic growth and lifting millions out of poverty, but at the cost of consuming finite resources and degrading natural capital.⁴⁸,⁴⁷

Key Takeaways

• The linear economy follows a "take, make, dispose" model, leading to resource depletion and significant waste management challenges.
• It originated and became prevalent during the Industrial Revolution due to mass production capabilities and the assumption of infinite resources.
• This model contributes heavily to environmental impact, including pollution and biodiversity loss.
• Its primary criticisms include resource scarcity, price volatility, and the increasing costs associated with waste disposal.
• The linear economy stands in stark contrast to the emerging principles of sustainability and resource efficiency.

Formula and Calculation

The linear economy does not involve a specific financial formula or calculation in the way that investment metrics do. Instead, its "formula" is a conceptual representation of the flow of materials through an economic system. It can be broadly described as:

This conceptual flow highlights the one-way nature of the system, where value is primarily created and consumed once, without emphasis on recovery or regeneration. The end-stage of "Dispose Waste" signifies a loss of material value and often leads to landfill or incineration.

Interpreting the Linear Economy

Interpreting the linear economy primarily involves understanding its inherent unsustainability and the consequences of its widespread adoption. This model implies a continuous depletion of finite natural resources and an escalating generation of waste.⁴⁶ The reliance on this model suggests an economic system where the long-term costs of environmental damage are not fully accounted for in the short-term economic gains, often leading to market failures.

From a financial perspective, a company operating solely within a linear economy framework might face increasing risks related to the volatility of resource prices and potential supply chain disruptions as critical materials become scarcer.⁴⁵,⁴⁴ The interpretation shifts from a purely production-and-consumption metric to one that considers the externalized costs and risks. Businesses and governments are increasingly recognizing that continued adherence to the linear economy can lead to significant economic losses and hinder future prosperity.⁴³,⁴²

Hypothetical Example

Consider a hypothetical smartphone manufacturer operating entirely within a linear economy framework.

1. Extract: The company procures virgin raw materials like rare earth minerals, plastics, and metals from mining operations globally. These materials are extracted without significant consideration for their finite nature or the environmental impact of their extraction.
2. Manufacture: These materials are then processed and assembled into new smartphones in factories. The manufacturing process is optimized for speed and cost, often resulting in significant waste by-products, such as scrap metal or chemical effluents, which are then disposed of.
3. Consume: The smartphones are sold to consumers who use them for an average of two to three years. There is little incentive or infrastructure for repair or upgrades; products may even be designed for planned obsolescence, leading to relatively quick depreciation and replacement cycles.
4. Dispose: Once a consumer decides to upgrade or their phone breaks, the old device is typically discarded. This electronic waste (e-waste) often ends up in landfills, where valuable materials are lost and hazardous substances can leach into the environment. The company has no responsibility for the product after its sale and disposal. This cycle then repeats with the production of new phones from newly extracted resources.

Practical Applications

The linear economy model is observed across various sectors of the global economy, primarily in industries with intensive consumption of physical goods.

• Manufacturing: Many traditional manufacturing processes, from automotive to electronics, historically follow the linear model, converting virgin raw materials into products that are eventually discarded.
• Fashion and Textiles: The fast fashion industry exemplifies the linear economy, with rapid production of low-cost garments often designed for short-term use, leading to massive textile waste.
• Packaging: Single-use packaging materials, common in food and beverage industries, are a direct outcome of linear economic thinking, where items are used once and then disposed of.
• Construction: The construction sector is a significant consumer of resources and generator of waste, with materials often used once in buildings and then landfilled during demolition.⁴¹

Governments and international organizations are increasingly highlighting the need to transition away from this model. For example, a 2021 Presidential Executive Order in the U.S. set goals for federal agencies to minimize waste and promote a shift to a circular economy.⁴⁰ The OECD, through its RE-CIRCLE project, provides policy guidance to help countries move towards more resource-efficient and circular economies.³⁹,³⁸

Limitations and Criticisms

The linear economy faces significant limitations and has drawn considerable criticism due to its unsustainable nature.

1. Resource Depletion: A primary criticism is its heavy reliance on the continuous extraction of finite resources. As global consumption increases, the strain on these resources intensifies, leading to their rapid depletion.³⁷
2. Environmental Degradation: The "take, make, dispose" model is inherently polluting. Extraction processes can lead to habitat destruction and high energy and water consumption, while manufacturing often results in toxic emissions.³⁶ The disposal phase, particularly landfilling and incineration, contributes to pollution, greenhouse gas emissions, and biodiversity loss.³⁵,³⁴,³³
3. Economic Inefficiencies and Risks: The linear economy leads to significant economic inefficiencies by discarding valuable materials after a single use.³² Businesses operating within this model face "linear risks," including price volatility of raw materials and disruptions in their supply chain.³¹,³⁰ The rising costs of waste management and stricter regulations also cut into profits.²⁹
4. Lack of Resilience: An economy dependent on continuous new inputs and generating vast waste is less resilient to shocks such as resource scarcity or geopolitical tensions affecting raw materials supply.²⁸
5. Global Waste Crisis: The linear model has contributed to an escalating global waste crisis. Without significant changes, global waste volumes are projected to increase by 70% by 2050, reaching over 3 billion tonnes annually.²⁷,²⁶ This unsustainable trajectory is widely criticized by organizations advocating for sustainable development.²⁵

The Ellen MacArthur Foundation, a prominent proponent of a circular economy, frequently highlights the detrimental impacts of the linear economy, calling it a "polluting system that degrades natural systems."²⁴

Linear Economy vs. Circular Economy

The linear economy and the circular economy represent two fundamentally different approaches to economic activity and resource management.

While the linear economy has driven historical economic growth and material abundance, it is increasingly recognized as unsustainable given finite natural resources and growing environmental concerns.⁹,⁸ The circular economy offers an alternative vision, seeking to decouple economic activity from resource consumption and environmental degradation.⁷,⁶

FAQs

What does "take, make, dispose" mean in the linear economy?

"Take, make, dispose" describes the linear economy's progression: raw materials are "taken" from the Earth, products are "made" from these materials, and once used, these products are "disposed" of as waste. This simple phrase encapsulates the one-way flow of resources in this economic model.⁵

Why is the linear economy considered unsustainable?

The linear economy is unsustainable because it relies on the continuous extraction of finite natural resources and generates vast amounts of waste that the planet cannot absorb without severe environmental consequences, such as pollution, habitat loss, and climate change.⁴,³

How does the linear economy impact businesses?

Businesses operating within a linear economy face increasing risks such as fluctuating raw material prices, supply chain disruptions due to resource scarcity, and rising costs associated with waste disposal and stricter environmental regulations. These "linear risks" can negatively impact profitability and competitiveness.²,¹