In today’s Economix Blog, Edward Glaeser reminds us of a paradox that William Stanley Jevons posed in the 1800s.  When public policy makes something more efficient (such as automobiles or electrical appliances), people may respond by expanded their use of the underlying product (gasoline or electricity).  For example,  CAFE standards, which seek to increase the gasoline efficiency of automobiles by requiring a higher miles per gallon standard for cars, may actually induce us to drive more.  It all depends upon how much cheaper it is to drive, and the price elasticity of demand.  We need to be sure that the adopted policy serves its ultimate objective, for example, to reduce an externality such as congestion or carbon emissions. As Glaeser puts it,

“Well-designed policies, like a congestion tax or carbon tax, can reduce social problems by getting the right sort of behavioral response; interventions that create an offsetting behavioral response can push the world in the wrong direction….The real lesson is that a change in the effective price of a commodity leads to a behavioral response, and, in some cases, that response can be so strong that it reverses the desired effect. As America considers new policies in public health, environmentalism and financial regulation, Jevons is as relevant as ever.”