Jevons paradox

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Economics is sometimes defined as the study of how society allocates scarce resources. Technological improvement is the means by which resources are put to better uses to produce more goods at cheaper prices. Theoretically, improving the efficiency of a resource-consuming activity would lead to a decrease in the amount of that resource being used. Or so you would think. In practice, the theory is of very little help as it only explains first round effects.

In 1865, the English economist William Stanley Jevons observed that technological improvements that increased the efficiency of coal-use led to the increased consumption of coal in a wide range of industries. He argued that, contrary to common intuition, technological progress could not be relied upon to reduce fuel consumption. - all excerpts from Wikipedia

The very first steam engines were used to pump water out of mines, thus allowing the miners to deeper and access more coal. An improvement that would increase the engine's output would allow the miners to go even deeper or to build a smaller, less costly, engine. This improvement in efficiency would be of great advantage to the owners of the mine who would now have a cost advantage. It would mean more output and/or lower prices for coal, compared to their competitors, of course. The engine itself would consume less coal per ton of water displaced, which, as put forward by the theory, should decrease the use of coal (as far as production remained roughly the same). Alas, it is only at that particular mine that we might witness an decrease in the use of coal.

It is not long before second round effects start having an impact. Businesses that couldn't afford a steam engine when it was first introduced might now want to take a second look. Low-lying areas that had more water to pump out but also distant mines where coal mining would be profitable were it not for the high transport costs can both benefit from a cheaper and more efficient steam engine. As a result, more steam engines are built necessitating the use of more coal to keep them running. Further improvements in size, output and weight would herald the rise of the factory and the steam locomotive. All of this is to say that an improvement in efficiency will drive down the relative cost of using that technology, which will increase the demand for that technology. 

The Jevons paradox will trump all efforts at efficiency and conservation. A cheap, fuel efficient car will have a larger impact on overall fuel usage (and pollution) than a big, gas-guzzling SUV simply because it is more affordable and several times more units will be sold. The Tata Nano is a great example - its initial $1'600 price brought tens of thousand of new drivers on the road, drivers that used very little if any fuel before the car was introduced. It is virtually impossible to escape the paradox. Recent improvement in LED technology have made screens so cheap and energy efficient that they even show up at fast food restaurants in place of printed menus. Instead of reducing energy use, as was once thought, improvements in LED affordability and efficiency are now having the opposite effect. The same goes for household appliances, electronics, basically anything you can think of.

The Jevons paradox has been used to argue that energy conservation may be futile, as increased efficiency may increase fuel use. Nevertheless, increased efficiency can improve material living standards.

And that is the whole point. Improvements that drive down costs make technology more affordable and life less miserable. The reduction in cost and improvement in efficiency of the washing machine and other household appliances has given women more choices and liberties than the feminist movement. The right to vote isn't worth much if the woman still has to cook, do laundry and clean the house without the opportunity to educate herself and realize her potential in the labor market. With all that being said, is there anything that can be done to conserve resources? 

As the Jevons paradox applies only to technological improvements that increase fuel efficiency, policies that impose conservation standards and increase costs do not display the paradox.

The obvious conclusion is that efficiency improvement are not enough to fight global warming. Jevons paradox is the reason why all the cheer for better LEDs and similar technological improvements will result in naught. Intergovernmental agreements, conservation standards and entirely new technologies are necessary. And if fighting global warming seems silly to you, consider that all fossil fuels still pollute the environment (China is a prime example), whether you accept people's role in global warming or not.