THE Jevons Paradox Thread (merged)

[Aaron]

Wonderful... great... logical... with precedent. Crap

Jevons Paradox

William Stanley Jevons (1835-1882) is best known as a British economist who was one of the pioneers of contemporary neoclassical economic analysis, with its subjective value theory rooted in marginal utility.

Chapter Seven of The Coal Question was entitled "Of the Economy of Fuel." Here he argued that increased efficiency in using a natural resource, such as coal, only resulted in increased demand for that resource, not a reduction in demand. This was because such improvement in efficiency led to a rising scale of production. "It is wholly a confusion of ideas," Jevons wrote,

...to suppose that the economic use of fuel is equivalent to a diminished consumption. The very contrary is the truth. As a rule, the new modes of economy will lead to an increase of consumption according to a principle recognized in many parallel instances…. The same principles apply, with even greater force and distinctiveness to the use of such a general agent as coal. It is the very economy of its use which leads to its extensive consumption…. Nor is it difficult to see how this paradox arises…. If the quantity of coal used in a blast-furnace, for instance, be diminished in comparison with the yield, the profits of the trade will increase, new capital will be attracted, the price of pig-iron will fall, but the demand for it increase; and eventually the greater number of furnaces will more than make up for the diminished consumption of each. And if such is not always the result within a single branch, it must be remembered that the progress of any branch of manufacture excites a new activity in most other branches and leads indirectly, if not directly, to increased inroads upon our seams of coal…. Civilization, says Baron Liebig, is the economy of power, and our power is coal. It is the very economy of the use of coal that makes our industry what it is; and the more we render it efficient and economical, the more will our industry thrive, and our works of civilization grow (140-142).

The contemporary significance of the Jevons paradox is seen with respect to the automobile in the United States. The introduction of more energy-efficient automobiles in this country in the 1970s did not curtail the demand for fuel because driving increased and the number of cars on the road soon doubled. Similarly, technological improvements in refrigeration simply led to more and larger refrigerators. The same tendencies are in effect within industry, independent of individual consumption.

What he is saying is, I think, that people will consume what is available, over time, to the limits of it's availability. So that by increasing the energy efficiency of oil use, we will actually stimulate the growth in oil consumption and accelerate depletion rates.

Alrighty then...

[Cool Hand Linc]

It really does make sense. We have been seeing examples of this with electricity. Older inefficient appliances have been replaced with newer more efficient ones. Posted on new appliances are energy efficiency ratings. They really are more efficient. Yet we use more electricity now than ever.

Everybody is always looking to save a few dollars on their electric bill. Companies do it and so do consumers.

If my car is more efficient I can drive further for the same cost. Use better light bulbs that produce more lumens for the same watts so I can light my home more ‘brighter’ for the same cost rather than have the same lumens at a reduced cost.

It seems to be human nature.

[Pops]

Malthus was an optomist.

Snip…

“Malthus thought that population would approach a sustainable limit, then hover there, with many people living in poverty and misery. He did not imagine overshoot and sudden collapse. He did not understand that technology was converting mineral concentrations and much of the biosphere into windfall stocks that would stimulate rapid population growth. Now, two hundred years after Malthus, humans have multiplied their numbers far beyond any sustainable limit, and the end of the windfall stocks is in sight. “

http://www.geocities.com/davidmdelaney/ ... shell.html

Pops

[pip]

Interesting. I've seen this in farming in the Texas panhandle. Irrigation used to be primarily inefficient flood type. Center pivot sprinklers were introduced 10-15 years ago giving 90+% efficiency. Do we use less water now? No, instead of growing primarily wheat or other low water use crops, we can put enough water on the ground to grow corn. I doubt water use has decreased at all.

[Lister]

What he is saying is, I think, that people will consume what is available, over time, to the limits of it's availability. So that by increasing the energy efficiency of oil use, we will actually stimulate the growth in oil consumption and accelerate depletion rates.

Alrighty then...

That's exactly what he is saying and he is, in a perfectly free market, or even a market that is as free as the market was in his year, exactly correct. It doesn't necessarily hold for less-than-free markets. For example, you can buy a Hummer that gets eight miles to the gallon more easily now than if there were a law that prevented you from buying any car that got less than twenty miles to the gallon. That's one extreme. A mid-point might be a national gas tax or a luxury-energy tax. These taxes artifically lower demand. They also have the effect of stunting further innovation at the supply end while feeding innovation at the demand end.

[Aaron]

Some wise old guy once said that you cannot legislate intent. And while laws and taxes do alter specific activities, it still remains a constant that consumption of energy closely follows it availability. There is every reason to assume that any closed loop systems energy profile will be derived by available sources. The lack of margin in global oil markets is a telling indicator which speaks to the future of oil availability. As markets get tighter and oil prices rise, the lack of surplus will be felt in every sector of every economy. Crude is the basis for every market in the world. Cheap oil means cheap food, cheap transportation, cheap manufacturing… cheap life.

http://peakoil.com/article160.html&mode=&order=0&thold=0

[JLK]

There was an article in Forbes several months ago where one of their resident free market columnists hypothesized that making automobiles more efficient would have the perverse effect of increasing total gasoline consumption. I tried to find the article, with no luck.

Increased efficiency probably does increase usage in most instances, but the amount of increase will vary from situation to situation and in no way is it inevitable that aggregate gross consumption of the resource in question will increase. In the irrigation example given above, there is economic incentive to harness the increased efficiency by watering more land, as long as the extra land is available and there is a market for the marginal extra amount of crops. In this case, the economic incentives could result in a net increase of the aggregate gross amount of water that is consumed by the business.

In the case of the personal automobile, I think that things would be different. If cars become more efficient some people in marginal cases of poverty might loosen up and increase their total mileage driven, but the vast majority of people would be driving more or less the same as they are now. The gross aggregate use of gasoline would clearly decrease.

[Leanan]

In the case of the personal automobile, I think that things would be different. If cars become more efficient some people in marginal cases of poverty might loosen up and increase their total mileage driven, but the vast majority of people would be driving more or less the same as they are now. The gross aggregate use of gasoline would clearly decrease.

I dunno... You're right, people wouldn't necessarily drive more. But they might buy cars when they took public transportation or carpooled before. And they might choose an SUV or a Hummer instead of a compact car or hybrid vehicle.

The current high gas prices are not reducing demand right now. But they are hitting full-size SUV sales, suggesting that in the future, gas use will go down.

The high gas prices of the late '70s and early '80s did reduce consumption. Laws were passed mandating fuel-efficiency standards, we had the 55 mph speed limit (which was for conservation, not safety), there were new home insulation specs, etc. Oil consumption dropped and didn't recover for almost 20 years. Until the various conservation laws were weakened or repealed.

This is one reason the Saudis don't want oil to get too pricey. They remember what happened last time that happened - oil at $10 a barrel.

[Pops]

This graph shows that (in Washington state at least) spikes in price do reduce driving short term but between 1970 and ?80 while cents per mile increased by almost 50%, miles driven per capita still went from 6k ? 7k.

http://tinyurl.com/6zylg


When gas costs dropped, miles driven increased, but at a similar rate.

The '70s & '80s saw big increases in MPG, but people negated that benefit by driving more. In the ?90s they negated the benefit of lower prices by buying bigger and less efficient vehicles. Now they are stuck with that decision and are whining.

At least that?s my take.

[Aaron]

Not what I got from Jevon -

Sure we began using less gasoline for driving after the OPEC embargo and less electricity for heating/cooling etc... through conservation efforts.

But we didn't actually consume less energy... we just used it in different ways. In the long run, our use rises to the level of energy available, in almost all circumstances. So we can conserve all we like, and should, but it does not alter the argument in the slightest... we spend what we have.

[Pops]

Here is another page with a nice table showing world per capita gasoline consumption through ‘01. After rising steeply to a peak in ’78 of around 185 liters per person worldwide, usage dropped to around 160 l/p in the mid ‘80s and has risen pretty steadily to about 175 l/p through ‘01.

http://earthtrends.wri.org/text/ENG/variables/292.htm

US consumption (which obviously weights heavily on the overall) followed the same trend, topping at around 1,800 l/p and touching 1,500 in ’85 and again in ’91.

No matter how we’ve improved mileage, the US was using almost 1,600 l/p in ’01 - about the same as in ‘72.

Of course there are lots more people using that amount today.


Good country-by-country info there if one has the time to look.

[Leanan]

Sure we began using less gasoline for driving after the OPEC embargo and less electricity for heating/cooling etc... through conservation efforts.

But we didn't actually consume less energy... we just used it in different ways.

We did actually consume less energy. The data shows it clearly. The U.S. and the world cut back. That's why the price of oil dropped to $10/barrel.

However, as Lister said, we don't really live in a perfectly free market. The drop probably would have been shorter, and smaller, if we and other countries had not enacted conservation laws.

[Aaron]

Let me say this another way...

All of the crude oil extracted, all of the gas, and coal, and uranium too; Every bit of electricity generated all went to some market.

If I conserve and use less gas for example, while I am burning less gas, the money I didn't use to buy that gas is still with me. I either stuff these savings under my mattress, or I spend it on something. If I saved it, it's just future spending potential, but if I spend it now, it's on something I could not otherwise afford. All I have accomplished is transferring this capitol into a brand new, energy consuming, system. The only real conservation is for the global economy to quit growing, otherwise, it's just a really big version of the shell game.

The point of all this is that despite high energy prices, or conservation, we consume all the energy products we produce, one way or another.

[Leanan]

The point of all this is that despite high energy prices, or conservation, we consume all the energy products we produce, one way or another.

We do. But the catch is that no one produces anything that there's no market for. Sony won't make more Playstations than they can sell. The Saudis won't drive down prices too much by pumping an oversupply of oil. So of course we consume everything we produce.

I agree, we can't continue growing forever. However, conservation can make the transition smoother.

[Aaron]

The contemporary significance of the Jevons paradox is seen with respect to the automobile in the United States. The introduction of more energy-efficient automobiles in this country in the 1970s did not curtail the demand for fuel because driving increased and the number of cars on the road soon doubled. Similarly, technological improvements in refrigeration simply led to more and larger refrigerators. The same tendencies are in effect within industry, independent of individual consumption.

And if such is not always the result within a single branch, it must be remembered that the progress of any branch of manufacture excites a new activity in most other branches and leads indirectly, if not directly, to increased inroads upon our seams of coal….

Using the same amount of energy more efficiently, makes no difference in depletion rates. So unless we argue that Jevon was wrong,

increased efficiency in using a natural resource, such as coal, only resulted in increased demand for that resource, not a reduction in demand. This was because such improvement in efficiency led to a rising scale of production.

..and that saved energy would go unused today for future generations, then we must conclude that conservation efforts actually stimulate energy consumption. Judging from the Hummers I see on the road, I'm guessing that old Jevon was right...

[Pops]

Though I should be working…

First, Leanan, I agree that SA must have learned a lesson by constricting supply, but that presupposes they CAN increase production.


Second, I’ve read many times this same conclusion:

“Fuel efficiency standards were also supposed to reduce gasoline consumption. But higher energy efficiency usually leads to more energy use, not less. Cars today get around 50 percent better mileage than they did in 1970; over the same 30 years, the average number of miles driven per person has doubled.”

http://www.jewishworldreview.com/jeff/jacoby072001.asp

And this graph (again from WA), showing mileage increased from 12.2mpg in ‘70 to 16.6mpg in ’93, over the same period, vehicle miles per capita, rose from 5,970 to 9,140 per year.

http://www.cted.wa.gov/energy/archive/F ... 09page.htm

Conservation WILL happen - but it won't be voluntary.

[Leanan]

I think Jevon is wrong, at least when it comes to the specific facts. We did cut our energy use in the '80s, and it stayed down until we started repealing the conservation laws. Admittedly, that's not a completely free market, but to say conservation can't help at all is just wrong.

See the graph:

http://www.eia.doe.gov/emeu/25opec/sld020.htm

The dip is obvious. It can also be seen in the history of oil prices. Prices crashed when people started conserving:

http://www.eia.doe.gov/emeu/cabs/chron.html

And because of that, oil producers pumped less oil:

http://www.bigwig.net/sergey/hubbert.htm

The famous graph that of "Hubbert's Peak" clearly shows a dip after the '70s oil shock - not the smooth Gaussian curve Hubbert predicted. If not for that drop, we'd probably be past peak by now.

Yes, in the long run, we do have to limit growth. But conservation can mean the difference between hitting peak now, or hitting peak ten or 20 years from now.

[Aaron]

I would argue, using the same linked data, that consumption was curtailed initially from the embargo itself, (can't use what's not there), and the resulting recession prolonged this condition through collapse of the consumer base for oil.

Only when we instituted conservation measures, did our economy recover, and thus cause consumption to increase...

Exactly as Jevon predicted.

[Pops]

Leanan, we agree completely; higher prices did promote conservation.

My point is that it wasn’t altruistic.

From the EIA link:

“The start of the decline in consumption of energy coincided with the onset and aftereffects of a second oil price increase”

The US is certainly the glutton at the table, but there are huge numbers of the world population that want to be gluttons too, I don’t see them deciding to forego their first SUV.

To be dispassionate, if you believe there will be a reduction in the future population of the world to a more sustainable level due to less cheap energy, conserving now and delaying the inevitable will only lead to a larger “reduction” in the future since the population will surely grow without constraints.

At any rate, IMHO, I don’t see any voluntary conservation efforts happening unless forced by increasing prices, this administration certainly won’t impose any of it’s own.

[Leanan]

Well, I see the front page is back up again. But there's a link to a hacker's site prominently displayed. At least I think that's what it is. It's in some foreign language...

I would argue, using the same linked data, that consumption was curtailed initially from the embargo itself, (can't use what's not there), and the resulting recession prolonged this condition through collapse of the consumer base for oil.

We weren't in recession throughout the 1980s. Reagan was re-elected because the economy was doing so well.

Only when we instituted conservation measures, did our economy recover, and thus cause consumption to increase...

It was the other way around, actually. The conservation measures happened immediately. (For example, the 55 mph speed limit was enacted in 1974.) It was during the '90s boom that we revoked them. Since we "didn't need them any more." (And it had been so long that most people forgot how bad the '70s oil crisis was.)

Leanan, we agree completely; higher prices did promote conservation.

My point is that it wasn’t altruistic.

Oh, I agree completely. I'll go further: if we and other countries hadn't passed all those conservation laws, energy use would have bounded back up almost immediately. So it wasn't really a free market situation.

The US is certainly the glutton at the table, but there are huge numbers of the world population that want to be gluttons too, I don’t see them deciding to forego their first SUV.

Some won't, but some will. I remember the first time my family bought a car with less than 8 cylinders. It was when my dad got a job in the Philippines. It was illegal to import any car with more than six cylinders. Because of the '70s oil crisis. So we got a pair of Chevy Novas, instead of the huge Chevy station wagons we usually chose.

At the time, the Philippines was a dictatorship. Marcos could say, "Only small cars," and make it stick. So altruism wasn't necessary.

To be dispassionate, if you believe there will be a reduction in the future population of the world to a more sustainable level due to less cheap energy, conserving now and delaying the inevitable will only lead to a larger “reduction” in the future since the population will surely grow without constraints.

Probably. But I hold out hope that people will realize the magnitude of the crisis, and do something about it before it's too late. And a few extra years to do something - limit immigration, encourage birth control, build nuclear power plants, whatever - might mean the difference between massive chaos and some semblance of order. China gets a lot of criticism for their "one child only" policy, but they had to do something. Other countries might take similar measures.

At any rate, In my honest opinion, I don’t see any voluntary conservation efforts happening unless forced by increasing prices, this administration certainly won’t impose any of it’s own.

Not in this country, probably, but in other countries, they have a chance. Either because they are dictatorships or because their birth rates are plummeting. (In much of Europe, birth rates are so low that only immigration keeps the population from shrinking. In Russia, which gets little immigration, the population is shrinking.) All they have to do is realize that low birth rates aren't the terrible problem they think they are.

As for us...you're right, probably only high prices will prompt us to conserve. But that's okay. Unless there's a sudden, catastrophic collapse (Ghawar floods overnight), we'll have gradually increasing prices, and thus a lot of time and incentive to conserve before it gets critical. Because we're so profligate in our energy use, we can cut back a lot without it hurting much. And once it's clear that there's not enough oil to meet our needs, and never will be, we just might have time to do something to mitigate the crash.

I vote we get rid of dry cleaners. They are incredibly wasteful and polluting, and no one likes to have to use them. Most of the people who do are business folk, who are forced to wear wool suits, even in the summer heat. Because everyone's wearing suits and ties, office buildings are air-conditioned to igloo-like conditions. Get rid of dry-cleaners, let people dress practically, and stop wasting so much money on heating and air conditioning...