Jevon's Paradox: Why Increased Efficiency Can Make Things Worse

September 6th, 2020 by 
Traffic on a highway demonstrating gas usage

Jevon's Paradox states that increases in the efficiency of a resource's use lead to increased usage of that resource. Throughout history, we can find examples of Jevon's Paradox in action, where improvements can paradoxically make certain things worse.

Approaching the Paradox: Two Paths to Increased Consumption

If you believe we need to reduce our gas consumption of gasoline, realize that (unfortunately!) increased efficiency only only leads to more gas usage. If your goal is only reducing the consumption of gas, only a tax on gasoline (or a superior alternative - like electric cars) will move the needle.

A parallel theory known as the Khazzoom-Brookes postulate lays out two roads to increased consumption.

Reductions in prices

A reduction in the price to use a resource leads to increased usage of that resource  (the rebound effect). For example, if you pay less to drive a mile, you drive more miles.

Increased prices

Energy efficiency gains in general lead to an increase in the standard of living. If something increases the quality of life in society, you can bet society is going to use more of it. which means the resource will be used more on a macro level .

(This also covers a third postulated case: increased efficiency in a resource was the bottleneck for something else. If we fix a bottleneck, presumably we're going to use more of the previous bottleneck and the thing it was blocking.).

Historical Examples of Jevon's Paradox

Jevon's Paradox: More Efficiency? More Traffic.
Jevon's Paradox: More Efficiency? More Traffic. From Nrbelex

William Jevon's formed his paradox while reasoning about the efficiency gains in coal in England. 

In 1846 he summarized his findings in his book The Coal Question. Jevon both predicted 'peak coal' in Britain (the idea that exponential growth would lead to the exhaustion of coal) and the rise of the economy of the United States.

His most relevant finding wa increases in the amount of coal needed in processes actually lead to more coal usage.

Jevon's effect in oil has been studied before in America. 

In 2005, Kenneth Small and Kurt Van Dender published a study called  "The Effect of Improved Fuel Economy on Vehicle Miles Traveled", detailing the increase in consumption of gasoline in America due to gas efficiency improvements from 1966 to 2001. Their study found that the short term rebound effect of increased efficiency in that time was a modest 4.7%. However, the long term rebound effect was a whopping 22.0%.

What Jevon's Paradox Means for America

Again, before any policy changes go into effect, we need consensus on the need to do something.

We try to be unbiased in our argument to reduce the price of gasoline. If you agree we should prioritize it, though, you need to consider Jevon's Paradox.

Corporate Average Fuel Economy laws cause too many undesirable effects to be useful. Forcing car companies to build smaller cars does nothing for demand,  smaller cars are less safe than larger cars, and increased efficiency only leads to more usage.

Reducing demand for fossil fuels won't come from legislation. Because of Jevon's Paradox, a reduction will come only from an increase in the price of fossil fuels.



PK started DQYDJ in 2009 to research and discuss finance and investing and help answer financial questions. He's expanded DQYDJ to build visualizations, calculators, and interactive tools.

PK lives in New Hampshire with his wife, kids, and dog.

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