AI Economics

Jevons paradox

The Jevons paradox occurs when an efficiency improvement causes demand to grow by more than the saving per use, so total resource consumption rises rather than falls.

Explanation

William Stanley Jevons observed that more efficient steam engines made coal a cheaper source of useful work, encouraged more applications, and helped expand coal consumption instead of simply conserving fuel.

The same mechanism could apply to AI: cheaper inference may lead to more users, more automated tasks, and far more model calls. A rebound effect merely offsets some efficiency savings; the full Jevons paradox is the stronger case in which total use actually rises, and it is a possibility rather than an automatic rule.

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