Recycling is never perfect. "Down Cycling", the fact that what you make from recycled materials is lower in quantity and/or quantity than the original, is an inherent limit of the process. Recycling slows the stream of waste to the landfill, but it doesn't, and can't end it. This doesn't mean that we should retreat from recycling. But, it does mean that it isn't a total solution. A sustainable economy also has to produce less waste in the first place. I have a neighbor (who incidentally, is otherwise very conservative on many issues) who thinks that excess packaging in one of the greatest scourges of our era. I won't go that far, but I do agree that reducing waste generation in the first place is a worthy goal and that there is a public interest in doing so because the public sector is generally responsible for figuring out what to do with waste once it is generated.
Hat Tip to Anne Zook, whose gorgeous blog has been added to the blog roll.