In economics, the Jevons paradox (/ˈdʒɛvənz/; sometimes Jevons effect) occurs when technological progress increases the efficiency with which a resource is used (reducing the amount necessary for any one use), but the rate of consumption of that resource rises because of increasing demand.
.. 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.
.. Jevons observed that England‘s consumption of coal soared after James Watt introduced the Watt steam engine, which greatly improved the efficiency of the coal-fired steam engine from Thomas Newcomen‘s earlier design. Watt’s innovations made coal a more cost-effective power source, leading to the increased use of the steam engine in a wide range of industries. This in turn increased total coal consumption, even as the amount of coal required for any particular application fell. Jevons argued that improvements in fuel efficiency tend to increase (rather than decrease) fuel use, writing: “It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth.”
A straightforward change would save money and improve health. So why isn’t Congress talking about it?
Somehow, this combination of work, family history, and deep boredom led Jevons to spend his days developing a theory about value, helping to start what is known as the marginal revolution. Before Jevons, economists thought that prices should be based on the cost of making goods. Jevons showed that prices should reflect the degree to which a consumer values a product. The marginal revolution taught a seeming paradox: if industrialists lowered their prices, they could make more money; more people would buy their goods, enabling economies of scale. It was a change in pricing strategy, almost as much as one in technology, that led to mass production and the modern world.
.. Mark Twain, in recalling his youth in Missouri, described a Dr. Meredith, who “saved my life several times” and charged the families in town twenty-five dollars a year, whether they were sick or well. This is what is now called capitation, an ungainly name for a system in which a medical provider is paid a fixed amount per patient—these days, it is typically upward of ten thousand dollars a year—whether that person needs expensive surgery or just a checkup.
.. Geisinger has long known that many of its diabetic patients live in areas with an abundance of fast-food places but no supermarkets. Last year, it began providing free, healthy groceries to those patients through a hospital pharmacy.
.. The cost for the food was two thousand dollars a year per patient. The savings from doing fewer procedures will come to more than twenty-four thousand dollars a year per patient.
.. in order to assure adequate care, providers must be rewarded based on objective indicators of health—to prevent doctors from profiting by withholding care—and that patient groups must be large enough and diverse enough that treating sick people does not jeopardize the financial health of providers.
.. David Feinberg estimates that replacing fee-for-service with per-patient payment would cut the nation’s health-care costs in half; others believe that the savings would be closer to ten per cent