the jevons paradox

The Jevons’ ParadoxBy Raja Abdarrahman

William Stanley Jevons

• Born on 1st September 1835 in Liverpool, England

• Departed on 13th August 1882 in Sussex, England

• Studied in University College London and Owens College (University of Manchester)

• Influenced by Jeremy Bentham (British philosopher, jurist, and social reformer. He is regarded as the founder of modern utilitarianism)


• English economist and logician, wrote the book “A General Mathematical Theory of Political Economy”

• Called the initiator of mathematical method in economics

• Applauded for his theories on the consumption and production efficiencies

• Famous for the Marginal Utility Theory


• He published General Mathematical Theory of Political Economy in 1862, outlining the marginal utility theory of value

• Admirable contribution to marginal revolution in the 19th

century

• Got public recognition on a large scale for his theory “The Jevons’ Paradox” / “The Jevons’ Effect”

Origin of The Jevons’ Paradox

• First described by William Stanley Jevons in 1865 in his book, “The Coal Question”

• Coal was one of the most required power sources of the time


• Technologists wanted to make machines efficient in the usage of coal to reserve it for the future

• James Watt had recently invented the upgrade of coal fired steam engine


• This along with other innovations made coal a more cost-effective and efficient power source

• As a result, the consumption of coal increased

• Increased coal consumption was thought of as a major concern for the future to come, by Jevons

• So he observed the changes in coal consumption after the technological advancements and came out with a theory which is now known as “The Jevons’ Paradox”

Jevons’ Paradox

• Economists believed that technological progress to make efficient power sources would decrease their consumption

• For example, before invention of steam engine 3 tons of coal was being used to run process A, but now only 1 ton was required

• It was thought of as a success by both the economists and technologists

• Economists were happy because energy was being provided at a lower cost, and technologists were happy because they had provided it

Jevons’ Paradox

• The primary objective was to reserve coal for the future to come

• As now 2 tons of coal was being saved, people thought that they had achieved what they wanted to achieve

• As the aftermath of this, firms and industries started to buy more and more coal fired steam engines and shifting towards way of productions that used coal

Jevons’ Paradox

• And now, it was being observed that the rate of England’s coal depletion was still increasing

• People including many economists believed that more of technological progress must be made in order to achieve a sufficient and efficient way of production

• But, William Stanley Jevons thought otherwise

Jevons’ Paradox

He suggested that:

• When technological progress is made to achieve cost effective sources of power, the prices of those sources fall

• As the consequence, the quantity demanded of those sources rises

• And what you primarily wanted to achieve could not be achieved i.e., reduced coal usage

Jevons’ Paradox

• Jevons argued that improvements in fuel efficiency tend to increase, rather than decrease, fuel use

"It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth.“ – The Coal Question

• Hence, improving technology would tend to increase the rate at which England's coal deposits were being depleted

The Rebound Effect

• One way to understand the Jevons paradox

• A rise in the efficiency with which a resource (e.g., fuel) is used causes a decrease in the price of that resource when measured in terms of what it can achieve (e.g., work)

• A fall in the price of a good/service will increase their quantity demanded

• Thus with a lower price for work, more work will be "purchased" (indirectly, by buying more fuel)

The Rebound Effect

• The resulting increase in the demand for fuel is known as the rebound effect

• 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 occurs when the rebound effect is greater than 100%

The Rebound Effect – Perfectly Competitive Market – Price Elastic Demand for Work

• Assumption: Fuel is the sole input used, and the only determinant of the cost of work

• If the price of fuel remains constant but the efficiency of its conversion into work is doubled, the effective price of work is halved and twice as much work can be purchased for the same amount of money

• If the amount of work purchased more than doubles (i.e., demand for work is price elastic), then the quantity of fuel used would increase, not decrease

The Rebound Effect – Perfectly Competitive Market – Price Elastic Demand for Work

What makes this paradox ineffective?

The Rebound Effect – Perfectly Competitive Market – Price Inelastic Demand for Work

• People will only buy the amount of work that they actually require, the demand will not increase a lot

• The amount of work purchased would less than double

• Hence, the quantity of fuel used would decrease

• In this case, the original objective will be achieved

The Rebound Effect – Perfectly Competitive Market – Price Inelastic Demand for Work

A Total Analysis

• William Jevons did not take into account all the other inputs that may decrease the price of work e.g.,(labor, land, machinery)

• He only examined the effect of changes in the price of fuel

• If he’d have done a full analysis, he’d have found out that these factors tend to decrease the effect of fuel efficiency on the price of work, and hence reduce the rebound effect

Harry Saunders’ Analysis, 1992

• Increased energy efficiency tends to increase energy consumption by two means

• First, increased energy efficiency makes the use of energy relatively cheaper, thus encouraging increased use (the direct rebound effect)

• Second, increased energy efficiency leads to increased economic growth, which pulls up energy use for the whole economy


• At the microeconomic level (looking at an individual market), even with the rebound effect, improvements in energy efficiency usually result in reduced energy consumption

• At the macroeconomic level, more efficient (and hence comparatively cheaper) energy leads to faster economic growth, which in turn increases energy use throughout the economy until maximum potential output is achieved


Saunders concludes that, taking into account both microeconomic and macroeconomic effects, technological progress that improves energy efficiency will tend to increase overall energy use, until the point where maximum potential output is achieved.

Implementations of Jevons’ Paradox

• People thought of it as a very useful advise in earlier times, and tried to generally reduce the usage of coal

• But, that did not really help in achieving economic growth

• In today’s world, technological advancement is considered as one of the most important objectives of any economy for overall growth

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