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In economics, the Jevons paradox (; sometimes Jevons effect) occurs when
technological progress
Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, science, ...
or government policy increases the
efficiency
Efficiency is the often measurable ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without ...
with which a
resource
Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified upon their ...
is used (reducing the amount necessary for any one use), but the falling cost of use increases its
demand
In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item ...
, increasing, rather than reducing, resource use. The Jevons' effect is perhaps the most widely known paradox in
environmental economics
Environmental economics is a sub-field of economics concerned with environmental issues. It has become a widely studied subject due to growing environmental concerns in the twenty-first century. Environmental economics "undertakes theoretical or ...
.
However, governments and
environmentalist
An environmentalist is a person who is concerned with and/or advocates for the protection of the environment. An environmentalist can be considered a supporter of the goals of the environmental movement, "a political and ethical movement that se ...
s generally assume that efficiency gains will lower
resource consumption Resource consumption is about the consumption of non-renewable, or less often, renewable resources. Specifically, it may refer to:
* water consumption
* energy consumption
** electric energy consumption
** world energy consumption
* natural gas co ...
, ignoring the possibility of the effect arising.
In 1865, the English economist
William Stanley Jevons
William Stanley Jevons (; 1 September 183513 August 1882) was an English economist and logician.
Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method in ec ...
observed that technological improvements that increased the efficiency of coal use led to the increased consumption of coal in a wide range of industries. He argued that, contrary to common intuition, technological progress could not be relied upon to reduce fuel consumption.
The issue has been re-examined by modern economists studying consumption
rebound effects
The rebound effect, or rebound phenomenon, is the emergence or re-emergence of symptoms that were either absent or controlled while taking a medication, but appear when that same medication is discontinued, or reduced in dosage. In the case of re ...
from improved
energy efficiency
Energy efficiency may refer to:
* Energy efficiency (physics), the ratio between the useful output and input of an energy conversion process
** Electrical efficiency, useful power output per electrical power consumed
** Mechanical efficiency, a ra ...
. In addition to reducing the amount needed for a given use, improved efficiency also lowers the relative cost of using a resource, which increases the quantity demanded. This counteracts (to some extent) the reduction in use from improved efficiency. Additionally, improved efficiency increases real incomes and accelerates
economic growth
Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
, further increasing the demand for resources. The Jevons' effect occurs when the effect from increased demand predominates, and the improved efficiency results in a faster rate of resource utilization.
Considerable debate exists about the size of the rebound in energy efficiency and the relevance of the Jevons' effect to
energy conservation
Energy conservation is the effort to reduce wasteful energy consumption by using fewer energy services. This can be done by using energy more effectively (using less energy for continuous service) or changing one's behavior to use less service (f ...
. Some dismiss the effect, while others worry that it may be self-defeating to pursue
sustainability
Specific definitions of sustainability are difficult to agree on and have varied in the literature and over time. The concept of sustainability can be used to guide decisions at the global, national, and individual levels (e.g. sustainable livi ...
by increasing energy efficiency.
[ Some environmental economists have proposed that efficiency gains be coupled with conservation policies that keep the cost of use the same (or higher) to avoid the Jevons' effect.] Conservation policies that increase cost of use (such as cap and trade
Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). Carbon emission t ...
or green taxes
An environmental tax, ecotax (short for ecological taxation), or green tax is a tax levied on activities which are considered to be harmful to the environment and is intended to promote environmentally friendly activities via economic incentives. ...
) can be used to control the rebound effect.
History
The Jevons' effect was first described by the English economist William Stanley Jevons
William Stanley Jevons (; 1 September 183513 August 1882) was an English economist and logician.
Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method in ec ...
in his 1865 book ''The Coal Question
''The Coal Question; An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal Mines'' is a book that economist William Stanley Jevons wrote in 1865 to explore the implications of Britain's reliance on coal. Given ...
''. Jevons observed that England
England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe b ...
's consumption of coal
Coal is a combustible black or brownish-black sedimentary rock, formed as rock strata called coal seams. Coal is mostly carbon with variable amounts of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen.
Coal is formed when dea ...
soared after James Watt
James Watt (; 30 January 1736 (19 January 1736 OS) – 25 August 1819) was a Scottish inventor, mechanical engineer, and chemist who improved on Thomas Newcomen's 1712 Newcomen steam engine with his Watt steam engine in 1776, which was fun ...
introduced the Watt steam engine
The Watt steam engine design became synonymous with steam engines, and it was many years before significantly new designs began to replace the basic Watt design.
The first steam engines, introduced by Thomas Newcomen in 1712, were of the "at ...
, which greatly improved the efficiency of the coal-fired steam engine
A steam engine is a heat engine that performs mechanical work using steam as its working fluid. The steam engine uses the force produced by steam pressure to push a piston back and forth inside a cylinder. This pushing force can be trans ...
from Thomas Newcomen
Thomas Newcomen (; February 1664 – 5 August 1729) was an English inventor who created the atmospheric engine, the first practical fuel-burning engine in 1712. He was an ironmonger by trade and a Baptist lay preacher by calling.
He ...
's earlier design. Watt's innovations made coal a more cost-effective power source, leading to the increased use of the steam engine in a wide range of industries. This in turn increased total coal consumption, even as the amount of coal required for any particular application fell. Jevons argued that improvements in fuel efficiency
Fuel efficiency is a form of thermal efficiency, meaning the ratio of effort to result of a process that converts chemical potential energy contained in a carrier (fuel) into kinetic energy or work. Overall fuel efficiency may vary per device, wh ...
tend to increase (rather than decrease) fuel use, writing: "It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth."
At that time, many in Britain worried that coal reserves were rapidly dwindling, but some experts opined that improving technology would reduce coal consumption. Jevons argued that this view was incorrect, as further increases in efficiency would tend to increase the use of coal. Hence, improving technology would tend to increase the rate at which England's coal deposits were being depleted, and could not be relied upon to solve the problem.
The Jevons' effect is perhaps the most widely known pitfall in environmental economics
Environmental economics is a sub-field of economics concerned with environmental issues. It has become a widely studied subject due to growing environmental concerns in the twenty-first century. Environmental economics "undertakes theoretical or ...
. Although Jevons originally focused on the issue of coal, the concept has since been extended to the use of any resource, including, for example, water usage
A water footprint shows the extent of water use in relation to Consumption (economics), consumption by people. The water footprint of an individual, community, or business is defined as the total volume of fresh water used to produce the goods and ...
and interpersonal contact. Although the concept of rebound effect was developed from the original theory by Jevons, the contemporary economics have traversed, to expand the scope of what is meant by rebound effects and to provide Jevons' effect a more concise definition. The concept of rebound effects has taken various iterations in different disciplines and has come to encompass several spheres of challenges and negative externalities. Walnum et al. carried out a systematic study of rebound effect research and observed the presence of seven viewpoints in which each provides unique interpretations and suppositions on the phenomenon: psychological study, ecological economics, energy economics, ecological economics, socio-technological discipline, evolutionary economics and urban planning. An eighth important position, that of industrial ecology, was also identified in further studies. The expansion of slavery in the United States
The legal institution of human chattel slavery, comprising the enslavement primarily of Africans and African Americans, was prevalent in the United States of America from its founding in 1776 until 1865, predominantly in the South. Sl ...
following the invention of the cotton gin
A cotton gin—meaning "cotton engine"—is a machine that quickly and easily separates cotton fibers from their seeds, enabling much greater productivity than manual cotton separation.. Reprinted by McGraw-Hill, New York and London, 1926 (); a ...
has also been cited as an example of the effect. The Jevons' effect is also found in socio-hydrology
Socio-hydrology; socio (from the Latin word ''socius,'' meaning ‘companion) and hydrology (from the Greek: ὕδωρ, "hýdōr" meaning "water"; and λόγος, "lógos" meaning "study") is an interdisciplinary field studying the dynamic interac ...
, in the safe development paradox called the ''reservoir effect'', where construction of a reservoir to reduce the risk of water shortage can instead exacerbate that risk, as increased water availability leads to more development and hence more water consumption.
Cause
Economists have observed that consumers tend to travel more when their cars are more fuel efficient, causing a 'rebound' in the demand
In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item ...
for fuel. An increase in the efficiency with which a resource (e.g. fuel) is used causes a decrease in the cost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which ...
of using that resource when measured in terms of what it can achieve (e.g. travel). Generally speaking, a decrease in the cost (or price) of a good or service will increase the quantity demanded (the law of demand
In microeconomics, the law of demand is a fundamental principle which states that there is an inverse relationship between price and quantity demanded. In other words, "conditional on all else being equal, as the price of a good increases (↑), q ...
). With a lower cost for travel, consumers will travel more, increasing the demand for fuel. This increase in demand is known as the rebound effect
The rebound effect, or rebound phenomenon, is the emergence or re-emergence of symptoms that were either absent or controlled while taking a medication, but appear when that same medication is discontinued, or reduced in dosage. In the case of re ...
, and it may or may not be large enough to offset the original drop in fuel use from the increased efficiency. The Jevons' effect occurs when the rebound effect is greater than 100%, exceeding the original efficiency gains.
The size of the direct rebound effect is dependent on the price elasticity of demand
A good's price elasticity of demand (E_d, PED) is a measure of how sensitive the quantity demanded is to its price. When the price rises, quantity demanded falls for almost any good, but it falls more for some than for others. The price elastici ...
for the good. In a perfectly competitive market where fuel is the sole input used, if the price of fuel remains constant but efficiency is doubled, the effective price of travel would be halved (twice as much travel can be purchased). If in response, the amount of travel purchased more than doubles (i.e. demand is price elastic), then fuel consumption would increase, and the Jevons' effect would occur. If demand is price inelastic, the amount of travel purchased would less than double, and fuel consumption would decrease. However, goods and services generally use more than one type of input (e.g. fuel, labour, machinery), and other factors besides input cost may also affect price. These factors tend to reduce the rebound effect, making the Jevons' effect less likely to occur.
Khazzoom–Brookes postulate
In the 1980s, economists Daniel Khazzoom and Leonard Brookes revisited the Jevons' effect for the case of society's energy use
Energy consumption is the amount of energy used.
Biology
In the body, energy consumption is part of energy homeostasis. It derived from food energy. Energy consumption in the body is a product of the basal metabolic rate and the physical activity ...
. Brookes, then chief economist at the UK Atomic Energy Authority
The United Kingdom Atomic Energy Authority is a UK government research organisation responsible for the development of fusion energy. It is an executive non-departmental public body of the Department for Business, Energy and Industrial Strategy ...
, argued that attempts to reduce energy consumption by increasing energy efficiency
Energy efficiency may refer to:
* Energy efficiency (physics), the ratio between the useful output and input of an energy conversion process
** Electrical efficiency, useful power output per electrical power consumed
** Mechanical efficiency, a ra ...
would simply raise demand for energy in the economy as a whole. Khazzoom focused on the narrower point that the potential for rebound was ignored in mandatory performance standards for domestic appliances being set by the California Energy Commission
The California Energy Commission, formally the Energy Resources Conservation and Development Commission, is the primary energy policy and planning agency for California.
Created in 1974 and headquartered in Sacramento, the Commission'core respon ...
.
In 1992, the economist Harry Saunders dubbed the hypothesis that improvements in energy efficiency
Energy efficiency may refer to:
* Energy efficiency (physics), the ratio between the useful output and input of an energy conversion process
** Electrical efficiency, useful power output per electrical power consumed
** Mechanical efficiency, a ra ...
work to increase (rather than decrease) energy consumption the ''Khazzoom–Brookes postulate'', and argued that the hypothesis is broadly supported by neoclassical growth theory
Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...
(the mainstream economic theory of capital accumulation
Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form o ...
, technological progress
Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, science, ...
and long-run In economics, the long-run is a theoretical concept in which all markets are in equilibrium, and all prices and quantities have fully adjusted and are in equilibrium. The long-run contrasts with the short-run, in which there are some constraints an ...
economic growth). Saunders showed that the Khazzoom–Brookes postulate occurs in the neoclassical growth model
Neoclassical or neo-classical may refer to:
* Neoclassicism or New Classicism, any of a number of movements in the fine arts, literature, theatre, music, language, and architecture beginning in the 17th century
** Neoclassical architecture, an ar ...
under a wide range of assumptions.
According to Saunders, increased energy efficiency
Energy efficiency may refer to:
* Energy efficiency (physics), the ratio between the useful output and input of an energy conversion process
** Electrical efficiency, useful power output per electrical power consumed
** Mechanical efficiency, a ra ...
tends to increase energy consumption by two means. First, increased energy efficiency makes the use of energy relatively cheaper, thus encouraging increased use (the direct rebound effect). Second, increased energy efficiency increases real incomes and leads to increased economic growth, which pulls up energy use for the whole economy. At the microeconomic
Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics fo ...
level (looking at an individual market), even with the rebound effect, improvements in energy efficiency usually result in reduced energy consumption. That is, the rebound effect is usually less than 100%. However, at the macroeconomic
Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole.
For example, using interest rates, taxes, and ...
level, more efficient (and hence comparatively cheaper) energy leads to faster economic growth, which increases energy use throughout the economy. Saunders argued that taking into account both microeconomic and macroeconomic effects, the technological progress that improves energy efficiency will tend to increase overall energy use.[ Besides the neoclassical interpretation, hypotheses generated from heterodox economics also are consistent with the existence of the Jevons effect.]
Energy conservation policy
Jevons warned that fuel efficiency gains tend to increase fuel use. However, this does not imply that improved fuel efficiency is worthless if the Jevons' effect occurs; higher fuel efficiency enables greater production and a higher material quality of life
Quality of life (QOL) is defined by the World Health Organization as "an individual's perception of their position in life in the context of the culture and value systems in which they live and in relation to their goals, expectations, standards ...
. For example, a more efficient steam engine allowed the cheaper transport of goods and people that contributed to the Industrial Revolution
The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
. Nonetheless, if the Khazzoom–Brookes postulate is correct, increased fuel efficiency, by itself, will not reduce the rate of depletion of fossil fuel
A fossil fuel is a hydrocarbon-containing material formed naturally in the Earth's crust from the remains of dead plants and animals that is extracted and burned as a fuel. The main fossil fuels are coal, oil, and natural gas. Fossil fuels m ...
s.[
There is considerable debate about whether the Khazzoom-Brookes Postulate is correct, and of the relevance of the Jevons' effect to ]energy conservation
Energy conservation is the effort to reduce wasteful energy consumption by using fewer energy services. This can be done by using energy more effectively (using less energy for continuous service) or changing one's behavior to use less service (f ...
policy. Most governments, environmentalists and NGOs pursue policies that improve efficiency, holding that these policies will lower resource consumption and reduce environmental problems. Others, including many environmental economists
Environmental economics is a sub-field of economics concerned with environmental issues. It has become a widely studied subject due to growing environmental concerns in the twenty-first century. Environmental economics "undertakes theoretical or ...
, doubt this 'efficiency strategy' towards sustainability
Specific definitions of sustainability are difficult to agree on and have varied in the literature and over time. The concept of sustainability can be used to guide decisions at the global, national, and individual levels (e.g. sustainable livi ...
, and worry that efficiency gains may in fact lead to higher production and consumption. They hold that for resource use to fall, efficiency gains should be coupled with other policies that limit resource use.[ However, other environmental economists point out that, while the Jevons' effect may occur in some situations, the empirical evidence for its widespread applicability is limited.
The Jevons' effect is sometimes used to argue that ]energy conservation
Energy conservation is the effort to reduce wasteful energy consumption by using fewer energy services. This can be done by using energy more effectively (using less energy for continuous service) or changing one's behavior to use less service (f ...
efforts are futile, for example, that more efficient use of oil will lead to increased demand, and will not slow the arrival or the effects of peak oil
Peak oil is the hypothetical point in time when the maximum rate of global oil production is reached, after which it is argued that production will begin an irreversible decline. It is related to the distinct concept of oil depletion; while ...
. This argument is usually presented as a reason not to enact environmental policies or pursue fuel efficiency (e.g. if cars are more efficient, it will simply lead to more driving). Several points have been raised against this argument. First, in the context of a mature market such as for oil in developed countries, the direct rebound effect is usually small, and so increased fuel efficiency usually reduces resource use, other conditions remaining constant.[ Second, even if increased efficiency does not reduce the total amount of fuel used, there remain other benefits associated with improved efficiency. For example, increased fuel efficiency may mitigate the price increases, shortages and disruptions in the global economy associated with peak oil. Third, environmental economists have pointed out that fuel use will unambiguously decrease if increased efficiency is coupled with an intervention (e.g. a ]fuel tax
A fuel tax (also known as a petrol, gasoline or gas tax, or as a fuel duty) is an excise tax imposed on the sale of fuel. In most countries the fuel tax is imposed on fuels which are intended for transportation. Fuels used to power agricultural v ...
) that keeps the cost of fuel use the same or higher.
The Jevons' effect indicates that increased efficiency by itself may not reduce fuel use, and that sustainable energy
Energy is sustainable if it "meets the needs of the present without compromising the ability of future generations to meet their own needs". Most definitions of sustainable energy include considerations of environmental aspects such as greenh ...
policy must rely on other types of government interventions as well. As the imposition of conservation standards or other government interventions that increase cost-of-use do not display the Jevons' effect, they can be used to control the rebound effect. To ensure that efficiency-enhancing technological improvements reduce fuel use, efficiency gains can be paired with government intervention that reduces demand (e.g. green taxes
An environmental tax, ecotax (short for ecological taxation), or green tax is a tax levied on activities which are considered to be harmful to the environment and is intended to promote environmentally friendly activities via economic incentives. ...
, cap and trade
Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants. The concept is also known as cap and trade (CAT) or emissions trading scheme (ETS). Carbon emission t ...
, or higher emissions standard
Emission standards are the legal requirements governing air pollutants released into the atmosphere. Emission standards set quantitative limits on the permissible amount of specific air pollutants that may be released from specific sources over ...
s). The ecological economists
Ecology () is the study of the relationships between living organisms, including humans, and their physical environment. Ecology considers organisms at the individual, population, community, ecosystem, and biosphere level. Ecology overlaps wi ...
Mathis Wackernagel
Mathis Wackernagel is a Swiss-born sustainability advocate. He is President of Global Footprint Network, an international sustainability think tank with offices in Oakland, California; Brussels, Belgium, and Geneva, Switzerland. The think-tank ...
and William Rees have suggested that any cost savings from efficiency gains be "taxed away or otherwise removed from further economic circulation. Preferably they should be captured for reinvestment in natural capital
Natural capital is the world's stock of natural resources, which includes geology, soils, air, water and all living organisms. Some natural capital assets provide people with free goods and services, often called ecosystem services. All of t ...
rehabilitation." By mitigating the economic effects of government interventions designed to promote ecologically sustainable activities, efficiency-improving technological progress may make the imposition of these interventions more palatable, and more likely to be implemented.
Other examples
Food production
Reducing the price of food can increase consumption, regardless of whether the change applies to cheap or expensive (often calorie-dense) foods. This additional consumption can manifest as overeating. Making food cheaper is often suggested as a way to make people less poor. However, it can have the adverse effect of promoting obesity, which comes with an economic cost.
In the United States of America, in 2012, less than 10% of income was spent on food, compared to 14% in 1984. Obesity from 1984 onwards to 2014 increased for all demographic groups. From 1974 to 2012, sugary foods became more available than ever before, with food consumption outside of one's home becoming more and more common.
Meat and dairy
Reducing the cost of production of meat, or dairy, may cause a problem, and increase overall consumption in countries where consumption is low at least so far and availability is relatively low as well. Increasing the efficiency of crop farming may increase pressure to deforest even more land for such production as well. Overall it would be an ecological loss.
5G internet
Reducing prices per GB of 5G compared to 4G, they also have a lower cost in electricity per unit of data, but the rebound effect threatens to turn it against a reduction of consumption and instead create an increase of consumption.
Population and economic development
Economic development may mitigate population growth
Population growth is the increase in the number of people in a population or dispersed group. Actual global human population growth amounts to around 83 million annually, or 1.1% per year. The global population has grown from 1 billion in 1800 to ...
rates, tending to lower reproductive rates by channeling women into the workplace, but it leads to an increase in energy use, as more cars are used, more electricity is generated, and more greenhouse emissions are sent into the atmosphere. Richard Heinberg
Richard William Heinberg is an American journalist and educator who has written extensively on energy, economic, and ecological issues, including oil depletion. He is the author of 14 books, and presently serves as the senior fellow at the Post C ...
wrote that China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
since the 1990s lifted hundreds of millions of its inhabitants out of poverty but in the process became the world's biggest producer and consumer of coal.
See also
* Downs–Thomson paradox
The Downs–Thomson paradox (named after Anthony Downs and John Michael Thomson), also known as the Pigou–Knight–Downs paradox (after Arthur Cecil Pigou and Frank Knight), states that the equilibrium speed of car traffic on a road network is de ...
, increasing road capacity can make traffic congestion worse
* Wirth's law
Wirth's law is an adage on computer performance which states that software is getting slower more rapidly than hardware is becoming faster.
The adage is named after Niklaus Wirth, a computer scientist who discussed it in his 1995 article "A Plea ...
, faster hardware can trigger the development of less-efficient software
* Andy and Bill's law
Andy and Bill's law is a statement that new software will always consume any increase in computing power that new hardware can provide. The law originates from a humorous one-liner told in the 1990s during computing conferences: "what Andy giveth, ...
, new software will always consume any increase in computing power that new hardware can provide
References
Notes
Further reading
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Paradoxes in economics
Industrial ecology
Peak oil
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Energy conservation
Environmental social science concepts