Less leads to more

Is the Jevons Paradox true? Is energy efficiency really a dud?

Let's look at what the Paradox says. Jevons Paradox is named after William Jevons, who observed in the 19th century that an increase in the efficiency of using coal to produce energy tended to increase consumption, rather than reduce it. Why? Because, Jevons argued, the cheaper price of coal-produced energy encouraged people to find innovative new ways to consume energy.

Jevons paradox, is really an extreme statement about an effect economists commonly observe called "rebound": some of the gains from energy efficiency are lost because people's consumption rises in response to lower prices.

For instance, when government requires more fuel-efficient cars, aggregate demand by cars for gas is less. So prices tend to decline, and (to a limited effect) that lower price motivates a few people to drive a little more than they might have, perhaps taking advantage of the lower prices to take an extra weekend trip.

Thus the gains from efficiency is lost in increased consumption. A classic example is lighting, which has gotten vastly cheaper per unit as the world has moved from lamp oil to candles to incandescent bulbs to fluorescent bulbs. Yet people now use more resources for lighting than we ever have in the past, since we have chosen to put lights almost everywhere.

Some opponents of the paradox say this is just a convenient theory that allows governments not to do anyhting about efficiency. Perhaps. But surely there is a truth in the theory. Human tendency has been to consume more of what is saved. Once your spending budget is fixed, any amount released from one product inevitably ends up in another basket, right?

Write in your views, while we bring you another post on efficiency.