When it Makes Sense to Worry About Jevons Paradox, and When it Doesn’t

Why High MPG Cars May be a Problem, But Efficient Lighting Isn’t

Tom Konrad, Ph.D.

Jevons Paradox: is the proposition that technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource.

-Wikipedia

Recently The Economist reported on research that concluded “making lighting more efficient could increase energy use, not decrease it.” Micheal Giberson at Knowledge Problem thought this was worth commenting on as an example of Jevons Paradox. I’m here to tell you that before we get worried about more efficient lighting, we should keep in mind when Jevons Paradox applies and when it does not.

Jevons’ Paradox is a consequence of the downward slope of the demand curve: when the price of something falls, we tend to demand more of it. The slope of the demand curve is also known as the elasticity of demand. A gently sloped demand curve (where consumption increases rapidly with decreasing price) is said to be "elastic," while a steeply sloping demand curve (where consumption increases only slowly with decreasing price) is said to be inelastic.

I recently wrote about some research showing that the elasticity of the demand for driving has increased in recent years. That means that the effect of Jevons Paradox is becoming more significant when it comes to driving: increases in automobile efficiency that decrease the cost of driving will have the effect of increasing driving more than they would have in the past, meaning that we should not count on increases in CAFE standards (which increase the efficiency of automobiles) to do much to reduce gasoline usage. Instead, we should focus on structural changes that reduce driving by increasing its marginal cost or decrease the marginal cost of alternative modes, such as mass transit.

Micheal Giberson’s note prompted me to look at the paper on which the Economist article was based. I found that the researchers assumed that the demand elasticity for light had not changed over the last 160 years, and would not change in the future. I find this assumption highly questionable, given that the structure of the lighting market has changed greatly as technology changed from candlelight to gas light to electric light.

When candles were the primary light source, acquiring light required a lot more effort than just flipping on a light switch, and it was possible to see the light you purchased being used up as a candle burned down. Today, we would have to go outside our house (at night) and watch the meter spin to see visual evidence of the cost of light, and even then it would be difficult if not impossible to isolate the effect of the cost of light from the cost of watching TV or running our refrigerator.

Because it’s much harder today for a consumer to determine the true cost of the light he is using, I expect that consumers will be much less sensitive to changes in the price of light than they were in the past. In other words, contrary to the assumptions in the paper, demand for light has most likely become much more inelastic in recent years, and so we should not expect that increases in lighting efficiency (and the associated decreases in lighting cost) will have much effect on total light consumption.

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15 Comments

  1. [...] Tom Konrad explains, “When it Makes Sense to Worry About Jevons Paradox, and When it Doesn’t.” [...]

  2. JamieB said

    Surely there’s a practical limit to how much driving we need to do and how much light we need in our homes? Just because something becomes cheaper, doesn’t mean that we need to do more of it.

    I just can’t see everyone strutting about homes lit as bright as day although the Economist seemed to think that a possibility. Likewise I can’t see people driving much more than they need to.

  3. Tom said

    Who, in 1960, could have imagined that a large segment of the population would commute 2 hours each way to work in a car? No one. Just because we can’t imagine it does not mean it will not happen.

    In 1960 commuter suburbs were jut beginning to be built… and it was cheap oil that made them possible. In 196, no one “needed” to drive far, but it was cheap oil that caused us to invent such needs: Big box stores located off the freeways, commuter suburbs with no public transport, driving vacations.

    • JamieB said

      OK but we’ve already reached that point and just because there has been this trend in the past doesn’t mean it will continue into the future.

      For example I think I can safely say that we won’t be commuting 4 hours each way by car in 2050, however cheap it gets (which it won’t because energy prices will more than offset efficiency gains). People have lives and driving is mostly a pain – there is a limit to what people will put up with.

      More of an issue, environmentally speaking, are increasing numbers of car owners. But that’s more down to capital costs than running costs.

      • Tom said

        I agree that we’re probably not going to see increased driving over the next decade, even with increased vehicle efficiency. But the faster vehicle efficiency increases, the slower miles driven is likely to fall. It’s in that sense that some of the potential gains of vehicle efficiency will be lost to Jevons Paradox.

  4. Eyeball said

    The fallacy inherent in many of these comments is that they approach the consumption of electricity as merely an issue of individual consumers and households. Obviously, businesses also consume electricity, and while some individual consumer electrical demands maybe inelastic, business demands are quite elastic – efficiencies reducing the cost of electricity will increase the profit per unit of many businesses and will hence spur more production, eating up any savings.

    • Tom said

      Eyeball,
      Business demand for electricity will only be elastic when the use electricity in the business

      1) Increases with marginal production (for instance electricity used to smelt aluminum, but not lighting for management offices)

      and

      2) The demand for the business’ output is elastic. (Demand for medical treatment is relatively inelastic, while demand for restaurant meals is relatively elastic.)

      In short, only some business demand for energy is elastic, so there are many places where increasing efficiency will create real gains, such as improving energy efficiency in hospitals.

  5. [...] blogged before about when Jevons’ Paradox applies, and when it does not. When energy consumers are price sensitive, they may respond to increasing efficiency by using more [...]

  6. at said

    As houses get larger, there is more need for lighting. People feel additional needs for outdoor security lighting. Some people have motion sensors and daylight sensors. If light becomes cheaper, then the cost trade-off for those sensors changes. Some people have dimly lit hallways, garages, closets, and crawlspaces.
    People are often careful to turn off the lights when leaving a room.
    Companies spend a great deal of effort ensuring that work spaces are not brighter than they need to be, and installing features that turn off lights automatically. If the price of running lights drops, then the value of these programs will drop. Most companies do not have lit signs. That could easily change.
    Airports are barely lit at all, but safety might be improved if they were lit like football stadiums.

    There are a million places where additional light would be useful. If the cost of operating lights drops, I would not be at all surprised if lighting demand increased.

  7. [...] best tool we have to increase vehicle efficiency, but more efficient vehicles (even if we ignore Jevons’ Paradox) may reduce emissions per mile, but they don’t get us anywhere as long as miles driven are [...]

  8. [...] best tool we have to increase vehicle efficiency, but more efficient vehicles (even if we ignore Jevons’ Paradox) may reduce emissions per mile, but they don’t get us anywhere as long as miles driven are [...]

  9. [...] best tool we have to increase vehicle efficiency, but more efficient vehicles (even if we ignore Jevons’ Paradox) may reduce emissions per mile, but they don’t get us anywhere as long as miles driven are [...]

  10. [...] There’s a new paper from the Victoria Transportation Policy Institute looking into the price elasticity of both miles driven and fuel use. The author, Todd Litman, has done an in-depth literature survey which will be of interest to readers who liked my recent look into Jevons’ Paradox. [...]

  11. [...] There’s a new paper from the Victoria Transportation Policy Institute looking into the price elasticity of both miles driven and fuel use. The author, Todd Litman, has done an in-depth literature survey which will be of interest to readers who liked my recent look into Jevons’ Paradox. [...]

  12. freedom13 said

    You’ve got great insights about Green Enegy Possibilities, keep up the good work!

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