Lentis/Jevons Paradox

Jevons paradox is an economic theory stating that improved efficiency of an agent will not reduce consumption of the agent. Rather, this new economy of use makes the agent more profitable and therefore increases the demand for it. More simply, increasing the efficiency of resource use will counterintuitively cause increased consumption. William Jevons first contrived this idea during the industrial age while studying coal. Coal was considered the "sole necessary basis of [England's] material power" and there was a great deal of concern about its finite supply. Jevons rebuffed reassurances that the increased efficiency of coal usage would extend the lifetime of the supply. Today Jevons paradox can be applied to many other questions and has survived into modernity as the rebound effect.

William Stanley Jevons

Rebound Effect

The Rebound Effect

The Rebound Effect explains the phenomenon behind Jevons paradox with supply and demand economics. An increase in efficiency of resource use will lower the price of the resource by yielding more utility from the same amount of resource. That is, each unit of the resource will yield more value but the price will stay the same, thus lowering the relative price per value. Economic theory states that a decrease in price will increase the quantity of the good demanded. This increase in quantity demanded is called the rebound effect. Jevons paradox is a special instance where reduced resource usage from increased efficiency is completely offset by increased demand. This can be easily understood through Jevons' example of coal. If the efficiency of coal conversion to work doubles, twice as much work can be done by the same amount of coal. This effectively halves the price of the work. According to economic theory, people will then buy more coal as a source of work. However, the magnitude of the rebound effect depends on the good's elasticity of demand. An elastic good is one whose demand is highly dependent on its price; that is, a change in price will significantly change the amount demanded. Inelastic goods often will not undergo Jevons paradox because the price reduction from increased efficiency will not sufficiently increase demand.

The rebound effect can even be indirect. The resource savings from increased efficiency may be spent alternatively yet still increase consumption. For instance, if you drive a fuel efficient car you use less fuel and thus spend less money. But perhaps you use these monetary savings to buy donuts at the gas station. The donuts also have a fuel cost since they were delivered by a truck run by fuel and cooked with a fuel as well. In this way, reduced consumption of fuel from your more efficient car is offset by spending on alternatives with their own fuel costs.

Cases

Energy Conservation

Today's lights are much more efficient than candles in 1800s. They are also used much more, to the extent that lights are seen from space.

Fouquet and Pearson studied the use of lighting in the United Kingdom from 1300-2000, specifically the cost of lighting fuel, lighting efficiency, price of light per lumen, and the consumption of light per person(lumen-hours/capita). Comparing lighting in 1800 to 2000, Sorrell analysed Fouquet's and Pearson's data and found that lighting efficiency had increased 1000 fold and the price had decreased to 0.03% of 1800s costs. This would indicate there are large price savings and decreased energy use to provide that lighting. Instead, people in the UK consume much more light: they have overall increased total consumption by 25630 fold. This fulfills Jevons paradox because the rebound effect has consumed all the energy savings brought about by the increased efficiency.

Another study examined the impact of household heating on energy use in poor homes in the UK. The program called Warm Front tried to improve fuel use for household heating in poor neighborhoods, renovating houses predominantly built between 1900 and 1976, by providing insulation and space heaters. Hong et al. modeled the theoretical energy savings and compared them to the actual savings. They found there was a strong rebound effect: they predicted that the use of a space heater and insulation should provide 61% fuel reduction but instead there was only 10-17% reduction. They suggested that that this was due to a direct rebound effect. The families used the money they saved (from saving energy) in order to maintain their household at a higher temperature to increase their comfort. While it is not a Jevons paradox on the whole of the 1000+ households studied, it does provide some evidence that improving efficiency will not lead to lower energy use.

Agriculture and Food Usage

As the world population is expected to reach 9 billion by 2050, food supply has become a major concern. Finding a way to increase food production while limiting land usage is imperative. Agricultural intensification produces more food per acre, sparing uncultivated land. Increased production per acre increases gross income. Farmers may be enticed to use their spared land to further increase production. If demand is inelastic as yield increases, prices will be driven down, making land sparing the practical solution. However, if there is elastic demand, prices slightly decrease, and it is sensible for farmers to use more land.

If there is an elastic demand, Jevons paradox occurs: an increase in efficiency of agricultural land use causes more land to be used. This case rejects Jevons paradox when prices are inelastic. A study conducted concluded that between 1970 and 2005 demand remained elastic, enticing farmers to use more land and produce more.

Another case deals with the role government plays in agricultural expansion. A studyshowed that land preservation is not effective in poor countries with government corruption. However, with high governance strengthening property rights, we can see that better governance increases bureaucratic efficiency and facilitates policies that can lead to land expansion. Jevons paradox holds when the benefits of intensification are large enough to overcome the costs associated with expansion of agricultural area (i.e. bureaucratic costs, costs for clearing land/obtaining credit). Strengthening the quality of government creates incentives to increase agricultural productivity. Increased productivity leads to a manifestation of Jevons paradox.

Computing (Moore's Law)

Moore's Law states that the number of transistors on integrated circuits will double approximately every two years. This means that there are significant advances in computing power and improvements in space efficiency. However, these improvements are subject to Jevons paradox. The enormous increase in computing power means that computations take less time to perform. This efficiency however, does not result in less time spent using the computer. In fact the trend suggests the opposite; as computers become faster, more time is spent using computers.

The efficiency of space use also seems to suffer from a Jevons paradox. It is certainly true that modern computers, in addition to having greater computing power, are also much smaller than their predecessors. However, the number of computers has grown so incredibly that the overall space taken up by computers, and their more efficient circuits, has increased. From 1981-2005, the number of computers per 100 people in the US grew from 1 to 81 computers. In addition to personal computers, there are devoted data centers consisting of many, many computers that also contribute to the overall space dedicated to computers.

Both of these paradoxes are amplified even further when one considers that computing has expanded beyond computers to cell phones, tablets, and even televisions.

Shortcomings and Limitations

The biggest shortcoming in studying Jevons paradox is the lack of significant quantitative data. This leads to chiefly theoretical work and debates among researchers. While there are many factors that contribute to the lack of quantitative data, two of the most notable are that the systems in study are not isolated and system boundaries are not easily defined.

Non-isolated Systems

Jevons paradox is a macroeconomic effect, which takes the economy as a whole into account rather than just one industry. It also examines outcomes over time, not just the immediate response. Quantitative long term data is shaped by many factors, making it difficult to discern Jevons paradox. Confounding factors such as income and population growth make it difficult to isolate Jevons paradox.

A New Yorker article by David Owen about refrigerator use from 1950 to today illustrates this problem. Refrigerators have become more efficient and today refrigerators are used in hotels, gas stations, supermarkets and even in multiple rooms of homes. Owen argues that increased refrigeration efficiency leads to people buying more food to be stored in refrigerators, increasing refrigeration demand. Although the price to run a refrigerator has decreased, which could cause additional refrigerator use, there are other contributing factors to the increase in refrigeration. The first is the income effect. As household incomes rise, people have more money to spend on luxury goods including heating, air conditioning, and refrigeration. Another factor is population growth between the 1970s and early 2000s. Once refrigerators became common household goods, the number of refrigerators grew along with the population. A final factor is urban sprawl, where people move to the suburbs. In the suburbs, houses are spread out and there is no longer a local market as there was in the mid to late 1900s. Instead, people drive to the grocery store less frequently and store more food in their refrigerator to keep it fresh. This would lead to a greater need for refrigeration for both store owners as well as consumers. It is difficult to determine whether increased efficiency led to a rebound effect or if any of these other effects were responsible for increases in refrigeration.

Defining System Boundaries

One of the difficulties in measuring Jevons paradox is defining the boundaries of the system a researcher is investigating. Boundaries could be anywhere from a household, county, state, country, or even the world. David Goldstein, an American energy conservation policy expert, demonstrated that California has policies in place that have essentially kept its per capita electricity use constant since 1974 while also improving on energy efficiency. However, when he defined the system as the United States, it appears that there may be a Jevons paradox. Other researchers have investigated the energy use and consumption in different regions of the world. They find that there may be some evidence of Jevons paradox in each of these regions despite population growth or wealth increase. Researcher T.J. Garrett argues that the system must include the global economy, especially when considering energy use. If researchers consider only one country, such as the United States, it may be that there appears to be no Jevons paradox. Yet the location of the energy use has merely been moved to another country, such as China. Thus changing the boundaries of the system being studied may completely change the outcome of a study of Jevons paradox.

Conclusions

Jevons paradox is often an unanticipated consequence of improving efficiency. It is important in public policy, especially in the field of environmentalism. Environmentalism has long been concerned with greenhouse gas emissions and greater energy efficiency is one approach to reduce power consumption. In fact, energy efficiency is considered the easiest, most cost-effective way of reducing emissions. However, if Jevons paradox holds true, then increasing energy efficiency will not result in a reduction of power consumption or greenhouse gas emissions. Policy makers should consider measures to counteract the price incentive from increased efficiency with an artificial incentive such as a tax on emissions. Jevons paradox widely applies in the modern age where rapid improvements take place. Given more space, this chapter would incorporate more cases, such as paper use and the "paperless office". This chapter would also further address means of overcoming Jevons paradox and elaborate on its role in environmentalism.