Economists and the Rebound Effect

Economists deny energy efficiency backfires. Are they crazy?

Some economists still deny the rebound effect from energy efficient improvements. It puzzles me. How can they be so thick?

The rebound effect occurs when savings from more efficient vehicles is spent on flying overseas.
Or more efficient machines produce cheaper cars and, as a result, they stimulate people who have never owned a car to buy their very first car. In both cases, the net energy savings may not be as initially anticipated. In other words, some of the savings from energy efficiency were wiped out by subsequent changes in consumers’ behavior.

Many economic studies have analyzed this effect. Big words like “demand elasticity”, “marginal utility” and “substitution effects” are spread over long documents here and there. Economists themselves admit that the task ahead is daunting, both at the micro and macro economic levels. Consumer behavior is impossible to predict due to the zillions of options available. Furthermore, today’s world economies are so fiendishly entangled that it is even more difficult for them to figure out any concrete conclusion at all.

Despite the fact experts say the problem is too complex, some audacious economists dare to declare that there is no conclusive causality. In other words, since they cannot prove that energy efficiency boosts energy consumption, they conclude there is no such thing. Correlation does not mean causation, they argue.

Economists in denial are shortsighted due to their own shortcomings. They are not looking at the big picture. They do know energy efficiency boosts economic growth. And increasing wealth is the prime reason for population growth and per capita consumption. Less than 2 billion people lived on the planet in 1910, and very few of them could afford driving private cars. Today, one hundred years later, 7 billion people share the planet, and millions of private vehicles clog our cities. Private jets for all –more fuel consumption per capita - are the next frontier. And home air conditioners. And heated private pools. And snow mobiles. It’s all coming. Just wait.

Meanwhile, economists are still entangled trying to figure out the marginal utility of running air conditioning 24/7. Do you know any rich economist? Now you know why.


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