Jevon’s Paradox, and More Ado About Gas Taxes

If I told you that increased fuel efficiency leads to more fuel consumption, what would you think?

Jevon’s paradox states that increases in the efficiency of the use of a resource lead to the increased usage of that resource.  Throughout history, examples of this effect in action can be found.  This brings me back to the topic of the gas tax.  If you are of the belief that we need to reduce our consumption of gasoline, increased efficiency (and attempted legislation to increase efficiency) alone will only lead to more gasoline usage.  If less gasoline usage is the goal, only a tax on gasoline will make it happen.

The Two Paths to Increased Consumption

According to Wikipedia (that bastion of faithful reporting…),  a parallel theory known as the Khazzoom-Brookes postulate lays out two roads to increased consumption.  The first is that the reduction in the price to use a resource leads to increased usage of that resource  (the rebound effect).  For example, a reduction in the price you pay to drive a mile in gasoline means you will drive more miles.  Second, energy efficiency gains in general lead to an increase in the standard of living, which means the resource will be used more on a macro level  (This also covers a third postulated case, where increased efficiency in a resource when that resource is the bottleneck for somehting else, will lead to more of that ‘something else’, and by extension more usage of that resource).

Historical Examples

More Efficieny?  More Traffic.  From Nrbelex
More Efficiency? More Traffic. From Nrbelex

William Jevon’s original paradox was formed as an observation about the efficiency gains in coal in England.  In 1846 he summarized his findings in his book The Coal Question. He both predicted ‘peak coal’ in Britain (the idea that exponential growth would lead to the exhaustion of coal) and the rise of the economy of the United States.  His most relevant finding was that increases in the amount of coal needed in processes actually led to more coal usage.

Jevon’s effect in oil has been studied before in America.  In 2005, Kenneth Small and Kurt Van Dender published a study called  “The Effect of Improved Fuel Economy on Vehicle Miles Traveled“, detailing the increase in consumption of gasoline in America related to gas efficiency improvements from 1966 to 2001.  Their study found that the short term rebound effect of increased efficiency in that time was a modest 4.7%.  However, the long term rebound effect was a whopping 22.0%.

What this Means for America

Again, before any policy changes go into effect, there needs to be consensus that we need to do something.  This article (like my last on the gas tax, linked below) makes an effort to be unbiased in the argument for or against the need to reduce the consumption of gasoline.  However, if you are interested in how the government could shape policy if this was a worthy goal, Jevon’s paradox has to be considered.

The Corporate Average Fuel Economy laws cause too many undesirable effects to be useful.  Forcing car companies to build smaller cars does nothing for demand,  smaller cars are less safe than larger cars, and increased efficiency only leads to more usage.  Reducing demand for fossil fuels in our country will not come from legislation forcing car companies to build smaller cars, it will come only from an increase in the price of fossil fuels.

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  1. says

    Since the invention / mass appeal of the seatbelt, deaths have increased substantially. It can be explained that the rebound effect is in full swing here, as drivers either consciously or unconsciously substituted out of safer driving into more reckless driving, which gives them more time outside of the car, at similar safety rates (consider that they now have seatbelts).

  2. says

    This is true. It’s also true that CAFE standards, which are an attempt to ‘legislate innovation’ in my eyes, quickly lead to a reduction in the size of cars. This is because the simplest way to increase fuel efficiency is to reduce weight. (Things like drag coefficient aren’t normalized to a standard size) Smaller cars don’t fare as well in accidents (see the link labeled ‘smaller cars are less safe’, above)

    It would be interesting to see a study separating fatal car accidents into correlations with various forms of policy change, like seat belt laws and fuel efficiency standards.


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