Jevons Paradox

"Jevons' Paradox" is the notion that lowering unit costs of production, on the basis of technological changes that lower the rate of energy consumption by using the same fuel source more efficiently than before, tends to bring about an increase in the production of commodities across all sectors that use or rely on that same energy source. The contradictory, paradoxical upshot is the tendency for the net consumption of energy to increase.

This "paradox" was first formulated in Jevons' The Coal Question published in 1865. A typical modern-day restatement from John H. Lienhard, an engineering professor at the University of Houston, follows below:

Herbert Inhaber and Harry Saunders take a disturbing look at energy conservation. They begin in 1865. An English mathematician, William Stanley Jevons, had just written a book titled The Coal Question. Watt's new engines were eating up English coal. Once it was gone, England was in trouble. And Jevons wrote:

'... some day our coal seams [may] be found emptied to the bottom, and swept clean like a coal-cellar. Our fires and furnaces ... suddenly extinguished, and cold and darkness ... left to reign over a depopulated country.'

The answer seemed to lie in creating more efficient steam engines. Jevons may not have realized that steam engines were already closing in on thermodynamic limits of efficiency. But he did see that increased efficiency wouldn't save us in any case.

Look at the Watt engine, he said. It was invented because the older Newcomen engine was so inefficient. Did Watt cut coal consumption by quadrupling efficiency? Quite the contrary. By making steam power more efficient, he spread the use of steam throughout the land. Coal consumption was skyrocketing.

A few years later, Henry Bessemer invented a new highly energy-efficient scheme for smelting steel. Jevons's argument played out once more. Now that we could have cheap steel, we began making everything from it - plows, toys, even store fronts. Energy-efficiency had again driven coal consumption upward.

The existence of unoccupied economic space under free competition is a precondition for any further specialization within the industrial division of labor to increase the net addition of the stock of industrial productive forces (even as productive forces at the margin were destroyed or otherwise rendered economically redundant). This modus operandi enables technological changes that increase the efficiency of the utilization of an energy source to become linked with, and eventually bring about, the net increase in overall consumption of the said energy source observed by Jevons.

Fundamentally, the accounting trick that makes this "paradox" seem more real than it actually is involves an arithmetic sleight-of-hand. Lowering unit costs of production is associated mainly with technological change. (However, in Jevons' time, during a crash of the business cycle, the conditions in which the technological change took place are nowhere referenced.) The introduction of new technologies of this order is invariably undertaken at the upturn of the next cycle by the enterprise or enterprises that wiped out many rivals during the preceding slump. In other words, a mass of productive forces was destroyed, which new technology will render superfluous or displace. It follows that any associated lowering of unit costs of production (an increase in economic efficiency) will manifest only in specific industries or sectors where production became more concentrated as a result of the previous crisis clearing weaker economic players away, or otherwise severely marginalizing them in the market. Energy consumption per employed worker will therefore go up as production becomes more concentrated in fewer, more highly capitalized enterprises, probably employing fewer workers than the entire sector employed before the crisis. The reality is that the capitalization of certain sectors in any given crisis is strengthened through such processes while weakened in others. However, Jevons' method proceeds according to a fallacious assumption that what is true for any one sector will be true for all, just as whatever is true for the individual consumer will be true for consumption in general and in society as a whole.

If the losses of the whole of the economic system (occasioned by the bankruptcies and other epiphenomena of the crisis) were properly added back in, but in the post-crisis phase as deductions from overall energy consumption, what would the net energy consumption look like? It might have changed little, if at all. In effect, the increased production of commodities and the accompanying increase in energy consumption, referenced by this so-called "paradox," can also be seen as "over-compensating" the losses represented by sidelining or destroying other productive forces. In this respect, the "paradox" is only the outward appearance of an undamped oscillator.

Another feature, of which Jevons was not (and, indeed, could not be) conscious, was that economic space would become completely occupied as oligopolies and cartels consolidated their overall role throughout the economy. The space in which free competition once predominated would thus be eliminated. Already, in Jevons' day this space was being pushed to the margins, although this was not understood at the time for what it actually was. The English economist J.A. Hobson, who wrote about the British Empire as an economic proposition, wrestled with certain parts of the problem as early as 1902 (Hobson 1902). The Austrian economist Hilferding glimpsed some implications in 1910 of the rise and role of finance capital, which he defined as the merger of banking and industrial capital (Hilferding 1910).

The crucial fact about an economic space that has already been divided up and can only be re-divided is that an increase or decrease in energy consumption loses any clear-cut linkage to or dependence upon changes in "productivity." These cease to regulate each other in any predictable way. In effect, as oligopolies, cartels, and monopolies displace free competition while appropriation of the fruits and ownership of the means of production remain private, the impossibility of production and consumption mutually regulating one another spreads to encompass all other relationships engendered earlier when free competition reigned supreme. Thus, Jevons' paradox disappears. Why? Because the relationship it proposed (in order to account for phenomena that appeared sequentially related) no longer exists, even though the phenomena themselves persist.

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