Understanding the Jevons paradox

There is considerable debate about the connections between efficiency and levels of resource consumption, particularly about the Jevons paradox and the rebound effect. To help clarify a variety of misunderstandings, we distinguish between the empirical claim that efficiency is often associated with rising resource consumption and the causal claim that efficiency leads to greater resource use. We show that at a variety of levels, a positive correlation between efficiency and resource consumption is common, suggesting that there is something to be explained. We then present various reasons that may explain these associations, some of which do not suggest a direct causal link between efficiency and consumption, but rather a connection through other mediating factors, and some of which do suggest a causal connection. We note that political economic theories propose that the effect of efficiency on consumption levels is not necessarily immediate and direct, but rather due to how it affects developmental pathways. We present an empirical analysis, using panel data on nations, which shows that more efficient nations tend to have higher rates of growth in electricity and overall energy consumption and carbon dioxide emissions, consistent with what political economic theories suggest.