Uneconomic Growth - The Role of Technology, and Jevon's Paradox

The Role of Technology, and Jevon's Paradox

Mainstream economists would argue that economies are driven by new technology—for instance, we have faster computers today than a year ago, but not necessarily physically more computers. Growth that relies entirely on exploiting increased knowledge rather than exploiting increased resource consumption may thus not qualify as uneconomic growth. In some cases, this may be true where technology enables lower amounts of input to be used in producing the same unit of product (and/or it reduces the amount or hazardousness of the waste generated per unit product produced) (e.g., the increased availability of movies through the Internet or cable television electronically may reduce the demand for physical video tapes or DVDs for films). Nonetheless, it is crucial to also recognise that innovation- or knowledge-driven growth still may not entirely resolve the problem of scale, or increasing resource consumption. For instance, there might likely be more computers due to greater demand and replacements for slower computers.

The Jevons Paradox is the proposition that technological progress that increases the efficiency with which a resource is used, tends to increase (rather than decrease) the rate of consumption of that resource. For example, given that expenditure on necessities and taxes remain the same, (i) the availability of energy-saving lightbulbs may mean lower electricity usage and fees for a household but this frees up more discretionary, disposable income for additional consumption elsewhere (an example of the "rebound effect") and (ii) technology (or globalisation) that leads to the availability of cheaper goods for consumers also frees up discretionary income for increased consumptive spending.