Friday, January 11, 2008

Jevon's Paradox and the Tata Nano

India’s Tata Motors on Thursday unveiled the world’s cheapest car, a $2,500 four-door subcompact the company promises will revolutionize the auto industry by bringing car ownership within reach for tens of millions of people. The potential effect of Tata’s Nano has given environmentalists nightmares, with visions of the tiny cars clogging India’s already choked roads and spewing millions of tons of carbon dioxide into the air.

Industry analysts, however, say the car may do for India and the developing world what Ford’s Model T did for America nearly a century ago — deliver unprecedented mobility to the masses.

In economics, the Jevons Paradox is an observation made by William Stanley Jevons, that as technological improvements increase the efficiency with which a resource is used, total consumption of that resource may increase, rather than decrease. It is historically called the Jevons Paradox as it ran counter to Jevons's intuition. However, the situation is well understood in modern economics. In addition to reducing the amount needed for a given output, improved efficiency lowers the cost of using a resource – which increases demand. Overall resource use increases or decreases depending on which effect predominates.

Dopamine hegemony ruthlessly drives the herd over the cliff and into the olduvai gorge....,

UPDATE:
Ed Dunn caught in the act of simultaneously peeping the same phenomenon and coming correct with its implications;This Car Should Make You Lose Sleep Tonight