Monday, September 14, 2009

--Jevons' Paradox and Your Home Bills

This post from Treehugger today got me interested in Jevons' paradox.

In his 1865 book The Coal Question, William Stanley Jevons noted that increases in the efficiency of coal-burning steam engines lead to an increase rather than a decrease in utilization of coal. This seems entirely logical, of course. If coal is an inefficient power source, demand for coal will be small. If demand is small, the price will be low. But if a means of increasing efficient utilization of coal is devised, then demand for the efficient but cheap fuel will skyrocket. Prices will also increase, but if increases in efficiency follow, then a cycle is created in which demand creates innovation creates demand.

Jevons' paradox governs the economic use of all fuel sources. Any innovation that makes utilization of a resource more efficient will result in increased rather than decreased utilization of that resource.

This effect is noteable also because of its inverse. Decrease in efficiency leads to decrease in utilization. When several highways were demolished in California, for instance, traffic jams ceased because fewer people tried to drive, assuming that driving would be impossible without the old highways. "If the roads were jammed before, just think how bad they'll be now!" Similarly, we see that congestion in Boston has increased following the Big Dig; Why? because availability of the resource "roads" has increased demand for the resource and therefore destroyed any gains by unleasing "latent demand."

Latent demand is the enemy of efficiency gains. We overlook latent demand when we assume that demand is internally rather than externally constrained. Do people on budgets take lightening fast showers because they hate the warm cascade of water or because they can't afford to drain the water heater every morning? If the cost of heating that water plummets, will they continue their miserly habits, or begin to allow themselves the pleasure of a morning shower?

Most of our hopes for saving energy expenditure in home building rest on the assumption that innovations will keep pace with increases in cost. If electricity rates rise, compact fluorescent bulbs and high efficiency washer/dyers will step in to make those new rates affordable.

But at some point, logically, we reach the plateau where innovation no longer surpasses cost increases. The American consumer is certainly capable of self-regulation (within the constraints placed upon cards being the means most recently responsible for loosening our collective belts). The fact is, though, that no one enjoys self-regulation. Discipline is just plain no fun. So if your budget allows for $200 a month in electricity expense, and new bulbs or appliances shave $20 off that expense, you're likely to kick the heat up a degree or two. Why not? You would have spent the money anyway! Go ahead! Treat yourself! Jevons knew you would!

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