The Azimuth Project
Jevons paradox (Rev #2)

The Jevons paradox states that increasing the efficiency with which a resource is used tends to increase the consumption of that resource. This goes back to the work of William Stanley Jevons, who in 1865 claimed that increasing the efficiency of coal use had increased its range of economically feasible applications and had thus increased coal use.

The Jevons paradox is also known as the rebound effect: increases in efficiency may cause resource consumption to drop at first, but then “rebound”.

The Jevons paradox has been used to argue that increases in efficiency are futile as a way of conserving resources. However, this is an issue that needs to be examined empirically on a case-by-case basis.

The reason is that increasing the efficiency with which a resource is used decreases its price when measured in terms of the good it produces. This will usually increase the demand for that good. This increase in demand may or may not be large enough to offset the original drop in demand from the increased efficiency. The Jevons paradox arises only when it does.

We can make this quantitative as follows. Classical economics posits a quantity called the price elasticity of demand, E dE_d. This is the percentage change in demand for a good divided by the percentage change its price (in the limit of a very small change in price):

E d=ΔQ d/Q dΔP/P E_d = \frac{\Delta Q_d / Q_d}{\Delta P/P}

where Q dQ_d is the quantity demanded and PP is the price. The Jevons paradox occurs when E d<1E_d \lt -1.

References

category: methodology