The Jevons Fallacy
1st February 2015
Last century, William Stanley Jevons, the famous economist who was in part responsible for the marginal revolution, reasoned that because the easy-to-get coal was already gotten, what was left was coal that was harder and harder to reach. Therefore, he argued, we would reach a point where coal would be much scarcer and much more expensive.
As I wrote in my bio of Jevons, here was his error:
Jevons failed to appreciate the fact that as the price of an energy source rises, entrepreneurs have a strong incentive to invent, develop, and produce alternate sources. In particular, he did not anticipate oil or natural gas. Also, he did not take account of the incentive, as the price of coal rose, to use it more efficiently or to develop technology that brought down the cost of discovering and mining (see natural resources).