Jevons Paradox

In economics, the Jevons paradox (/ˈdʒɛvənz/; sometimes Jevons' effect) occurs when technological progress or government policy increases the efficiency with which a resource is used (reducing the amount necessary for any one use), but the rate of consumption of that resource rises due to increasing demand.[1] The Jevons paradox is perhaps the most widely known paradox in environmental economics.[2] However, governments and environmentalists generally assume that efficiency gains will lower resource consumption, ignoring the possibility of the paradox arising.[3]

In 1865, the English economist William Stanley Jevons 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.[4][5]

The issue has been re-examined by modern economists studying consumption rebound effects from improved energy efficiency. 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, further increasing the demand for resources. The Jevons paradox occurs when the effect from increased demand predominates, and improved efficiency increases the speed at which resources are used.[5]