Daily Archives: July 5, 2012

Efficiency, conservation, and the inescapable Jevons Paradox

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Michael Giberson

Given the preponderance of government energy policies aimed at promoting technical efficiency, a careful consideration of the Jevons Paradox is in order. I’ve spent some time this summer reading about William Stanley Jevons, one of the three 19th-century economists co-credited with sparking the marginal revolution, and especially Jevon’s book The Coal Question. Most recently I’ve been reading the recently published The Myth of Resource Efficiency: The Jevons Paradox (2009).

Joseph Tainter’s foreword to The Myth of Resource Efficiency provides a clear statement of the importance of The Coal Question:

In his 1865 work The Coal Question, William Stanley Jevons (1835-1882) expressed the concern that Britain would lose its economic dynamism and preeminence in the world due to an inevitable depletion of its reserves of easily mined coal. Of course he did not foresee the dominance of petroleum, even denying its likelihood, and so the central worry of the book turned out to be misplaced. But The Coal Question contains a gem that enshrines the book as among the most significant works of resource economics. That gem is know today as the Jevons Paradox. It cannot be expressed better than in Jevons’s own Victorian prose:

It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth. (Jevons, 1866, p. 123)

As a rule, new modes of economy will lead to an increase of consumption… (Jevons, 1866, p. 123)

Now, 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. (Jevons, 1866, p. 124-125).

In short, as technological improvements increase the efficiency with which a resource is used, total consumption of that resource may increase rather than decrease. This paradox has implications of the highest importance for the energy future of industrialized nations. It suggests that efficiency, conservation and technological improvement, the very things urged by those concerned for future energy supplies, may actually worsen our energy prospects.

The Myth of Resource Efficiency, written by John M. Polimeni, Kozo Mayumi, Mario Giampietro, and Blake Alcott, examines the Jevons Paradox from several angles – everything from history of economic thought, to the methodological issues raised by measuring values over time, to application of complex adaptive systems thinking, to efforts to test empirically for efficiency-driven rebound and backfire effects.

One of the points the authors make quite clearly is that there is more to the Jevons Paradox than the direct effect of more-efficient resource use on demand for that resource, there is an indirect effect as well. Tainter in his foreword illustrates the idea clearly in reference to a poll conducted in Sweden concerning the environmental effects of meat consumption. When asked, “If you were to eat less meat in your daily diet, what would you do with the money this saves?” the surveyed Swedes indicated that they would travel more. Tainter pointed out that travel comes with environmental costs, just as eating meat does.

The energy efficiency policy implications are clear. Improvements in automobile fuel efficiency, for instance, reduce the cost of travel and would tend to lead to at least some additional travel and attendant fuel consumption. That additional travel will eat into some (or all, or more than all in extreme cases) of the conservation gains that might have been expected of the efficiency improvement. Yet beyond the direct rebound of improved fuel efficiency on fuel consumption, any consumer savings on fuel expense may also be spent other energy-resource-using activities. From the broad view of conservation policy, all such rebounds are relevant.

It is not exactly an optimistic book, as the Vaclav Smil blurb on the back indicates, “it may leave an unsuspecting reader rather depressed.” Smil follows the remark with a “[but] it leaves all of us better prepared to face the reality.” The macro-scale empirical work reported in the book say “energy-efficient technological improvements will not work. Rather, energy-efficiency technology improvements are counter-productive, promoting energy consumption. Yet energy efficiency improvements continue to be promoted as a panacea.”

But I’d say the depressing effects of the book mostly apply within a depletionist wordview. If you are worried that the world is on a downward Malthusian slide, then efficiency policy is a bright light guiding you through the tunnel. According to the book, the bright light is the headlight of an oncoming train: efficiency policy promotes faster depletion.

For us cheery resource optimists, however, the book remains valuable. Resource optimists like to use rebound effects to beat up on energy efficiency policy proposals. This book illustrates both how powerful this tool is that Jevons has given us and how subtle and complicated it can be to apply the tool well.

Manners, morality, coordination, and order

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Lynne Kiesling

Sarah’s post here on manners (including her Freeman essay and Matt Zwolinski’s BHL post) and Mike’s observations on them open up a great discussion about the importance of seemingly superficial informal norms for enabling us to live together and generate civil society. Mike’s absolutely right that the road to anarchy is paved with good manners, and that how we live together in society is through a web of institutions. Those institutions need not be formal, and they need not include what we identify as a “state”, and yet it’s possible to live together harmoniously. Anarchy is the absence of a state, not the absence of institutions or of order.

I want to riff off of one of Mike’s insights; in a comment on Sarah’s manners post he observes that “… morality, too, is a spontaneous order kind of system with many rules, and yet it is a mistake to insist that every action conform to every rule of morality in every case, …” I associate this idea first and foremost with David Hume, who argues that our morality arises from our sentiments, not from our reason. While sentiments can be shared and common across humans who live in different environments and cultures (thus leading to the consistent moral treatment of murder, for example, across different societies), they can also differ in some dimensions, so Hume makes an ethical subjectivist argument.

Hume’s argument leads to a couple of insights that I think are related to Mike’s and Sarah’s posts. Hume’s empiricism and ethical subjectivism clearly influenced his friend Adam Smith, who made related arguments in The Theory of Moral Sentiments. Smith combined two important empirical observations about humans that affect how we live together and form civil society — our behavior is grounded in our desire for sympathy (fellow feeling with others) and mutual sympathy (that feeling, right back atcha), which induces us to reflect on our behavior, and we are all individuals (I’m not. — Sssssh) who are diverse and heterogeneous in our desires and plans for how to thrive. How do we reconcile those different, and potentially conflicting, individual desires and plans with our desires for sympathy and mutual sympathy? We reflect on our behavior and our inner spectator judges and evaluates our behavior for how well it comports with generating sympathy and mutual sympathy. This is the internal process that disciplines our actions as we strive to maximize our well-being. Here’s the important point, though: it’s a process of coordination, of harmonization, not of a uniformity in which we all behave exactly the same way. We don’t have to all behave the same way or do the same things, or as Mike says, take actions that all conform to all moral rules in every way. But if we share a core set of moral rules that enable us to coordinate our actions and plans (don’t steal, don’t cheat, don’t murder, honor your contracts, honor your promises), even though we are all different, then we will best be able to thrive economically and sentimentally (I mean that in the Humean/Smithian sense, not the modern sense).

The other important thing that Mike’s point raises and that Hume and Smith lead to is the idea that moral rules can evolve and change over time as our environments and sentiments change. This is where, in my mind, Hayek picks up from Hume and Smith. Moral rules adapt and evolve over time, and those that have emerged over time as evolutionary robust (in the sense that they enable us to live together and thrive economically and sentimentally in civil society) become  more codified and more formal. Those that do not stand the test of time as our sentiments change erode, or are removed through conflict (violent or nonviolent). This institutional evolution model is one way to think about women’s suffrage, the civil rights movement, the evolution toward codification of same-sex marriage, and so on.

Even seemingly superficial actions such as adherence to a core set of manners contribute to this coordination, this harmonization. Good manners are a decentralized system for coordination and harmonization across people with diverse goals and interests. But our sentiments evolve over time, so good manners in 1811 in Regency England and good manners in 21st century US have some similarities and some differences. Even so, they enable us to coordinate and harmonize to mutual benefit.