The purpose of this article is to analyze recycling of used materials with resource potential as well as pollution potential from a viewpoint of environmental economics. It surveys the present circumstances of material and resource circulation, and shows how smooth recycling can be promoted in a market economy if it is supported by a formal regime of material circulation. In such a material circulating economy, resource potential of residuals which have once been treated as waste is realized as real market value, while their pollution potential is not realized. It is also demonstrated that promotion of recycling extends the life of landfill on one hand, and reduces the price of used materials on the other. An increase in the foreign demand for waste materials tends to arrest their price reduction. Yet, it is anticipated that recycling of waste materials in developing countries can not afford to deter their pollution potential, and may possibly diffuse real pollution.
