Jevons Paradox?
I promised some comment on Jevons Paradox in relation
to some of the solutions Mr. Gore has proposed in his book, namely that we use
more efficient light bulbs, insulate our houses, buy hybrid cars etc. Unfortunately
from my limited understanding of economics this won’t necessarily work. Here
is some stuff to think about if you are in the mood. I have found some
other interesting stuff related to this phenomenon which I will post another
time, I know some of this is hard to digest, but I think this is important if
we are going to understand and adequately address global warming. Jevons
paradox
From Wikipedia, the free encyclopedia
In
economics,
the Jevons Paradox is an
observation made by William Stanley Jevons, who stated that as
technological improvements increase the efficiency with which a resource is
used, total consumption of that resource may increase, rather than decrease. It
is historically called the Jevons Paradox since it ran counter to Jevons's intuition,
but it is well understood by modern economic theory
which shows that improved resource efficiency may trigger a change in the
overall consumption of that resource. The direction of that change depends on
other economic variables. Explanation
One
way to understand this is to observe that an increase in the efficiency with
which a resource (e.g., fuel) is used is effectively equivalent to a decrease
in the price of what the use of that resource achieves (e.g., work). Generally
speaking, a decrease in price of a good or service will be associated with an
increase in quantity demanded (see price elasticity of demand). Thus with a
lower price for work, more work will be "purchased". This increase in
quantity demanded for the results of using the resource may, or may not, be
large enough to offset the original efficiency gain. In the simplest case, if
the cost of fuel remains constant, but the efficiency of its conversion into
work is doubled, the effective price of work is halved and so more work could
be purchased for the same amount of money. If the amount of extra work
purchased more than doubles, in this case, then the quantity demanded for fuel
would actually increase, not decrease. A full analysis would have to take into
account the fact that a change in the quantity demanded for fuel would also
have an effect on the price of fuel, and therefore also on the effective price
of work. In
his 1865 book The Coal
Question, Jevons observed that England's
consumption of coal
soared after James Watt introduced his coal-fired steam
engine, which greatly improved the efficiency of Thomas
Newcomen's earlier design. Watt's innovations made coal a more cost
effective power source, leading to increased use of his steam engine in a wide
range of industries. This in turn made total coal consumption rise, even as the
amount of coal required for any particular application fell. Two
points that need to be addressed: Jevons Paradox is sometimes referenced in the
arguments on Peak
oil to show why conservation of oil will not slow the arrival or the
effects of peak oil. This is seen as a reason to not increase efficiency (if
resource x is not used here, it will simply be used elsewhere). While it is
true increased efficiency may not reduce demand, this does not take into
account other benefits the resource could generate, eg. a more efficient steam
engine meant many more people could travel and goods could be shipped in
cheaply. Secondly, in the context of peak oil, that will be a diminishing
resource causing prices to rise despite increased efficiencies. This
paradox has also been called waste
homeostasis[1] |