For decades, we\u2019ve heard from the powers that be that the energy crisis can be averted simply by conserving energy.\u00a0 If only we were to use less electricity or drive more fuel-efficient cars or turn the thermostat down low, the world would be a better place.\u00a0 Since the US would use less fossil fuels, the population would be able to lower its dependence on foreign oil, reduce greenhouse gas emissions, and so on.<\/p>\n
Unfortunately this public policy has exactly the opposite effect.\u00a0 As efficiency goes up by choices made at the microlevel, overall demand increases at the macrolevel and thus what seems like the right approach \u2013 use energy more efficiently \u2013 is in fact wrong.<\/p>\n
The argument for the Khazzoom-Brookes postulate is often discussed within the context of the Jevons Paradox<\/a>, which is basically an observation of seemingly non-intuitive behavior observed by William Stanley Jevons.\u00a0 Jevons observed that the overall demand for coal shot up dramatically after James Watt showed how to more efficiently use coal. \u00a0\u00a0Such a demand increase seems to go against the basic notion that a more efficient process should lower the consumption of a scarce resource and is due to the rebound effect.<\/p>\n A rebound effect<\/a> is a measure of the difference between an efficiency improvement associated with a resource use and the corresponding change in its use.\u00a0 According to the Wikipedia article, the rebound effect (RE<\/em><\/strong>) is defined as: RE<\/em><\/strong> = (E<\/em><\/strong>-D<\/em><\/strong>)\/E<\/em><\/strong>, where E<\/em><\/strong> is the percentage increase in efficiency and D<\/em><\/strong> is the percentage change in demand or use, with the convention that D<\/em><\/strong> is positive\/negative for a decrease\/increase in consumption (note that neither this notation nor the sign convention are discussed \u00a0in that narrative).\u00a0 For example, a 4% increase in efficiency that corresponds to a 3% decrease in demand gives a RE<\/em><\/strong> = (4-3)\/4 = 25%.<\/p>\n The Jevons Paradox occurs when the demand for the good is elastic; the slope of the efficiency-use curve (essentially a price-demand curve) is negative and less than 45 degrees.\u00a0 In this situation, the change in the relative price, due to the efficiency, is smaller (in some normalized sense) than the corresponding change in the use (relative demand).\u00a0 The paradox doesn\u2019t result when the demand is inelastic (with a negative slope greater than 45 degrees) or when a decreasing price causes an even bigger drop in demand.\u00a0 The cases of elastic and inelastic demand are shown in the following figure (patterned after the ones in the Wikipedia article).<\/p>\n
![\"\"](\"https:\/\/commoncents.blogwyrm.com\/wp-content\/uploads\/2017\/07\/Rebound-Effect.png\")
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