It is 1865. British economic power seems to have no end. London has become the dominant European power, unseating Napoleonic France. Its industry extends from Plymouth to Newcastle, fed by the rich colonies in Canada, Australia and India, the jewel of the British crown. In the same year that the workers’ movements began to mobilize in the first international, in which Lewis Carroll published Alice in Wonderland And that the Britannica Pax He promised a period of splendor, a young Liverpool economist alerts about him End of London’s domain for the same cause of its splendor: coal. Half a century later, the CEO of one of the most important multinationals on the planet rescues their ideas to explain what is happening with Artificial intelligence.
William Stanley Jevons posted in 1865 A treaty in which he analyzed the extreme dependence of the British empire of its main energy source. He coal He had been using the vapor machines that were spreading throughout the English cities as fuel for decades. In fact, as the efficiency of extraction improved, the more coal it had available at an increasingly lower price, and as the reduction of regulatory barriers allowed more easily to access this raw material, the more coal it was bought. How is it possible if common sense affects that there should be a limit? This is Jevons’s paradox.
The British economist realized that, according to technical progress or economic policies, they improve the efficiency of a raw material or a tool that affects the ability to manufacture goods, increases the demand for said raw material or tool. This economic effect, apparently contraintuitive, leads to the final consumption of the raw material being increasing for a collection of reasons that feed each other:
- The improvement of efficiency allows to manufacture more goods with the same consumption of sources, which increases income.
- Progress allows more raw materials to be obtained for the same cost, which reduces its price.
- Having more income and reducing spending, the surplus can be reinvested in increasing production.
- Other actors who could not access the raw material for the high initial cost begin to consume it, which increases the total demand of said raw material.
Jevons’s paradox serves as an economic theory that explains much of The industrial eraespecially in the role of the energy sources of an economy. Now some analysts are rescuing it to predict the economic behavior of Artificial intelligence.
The fall of Nvidia explained by Jevons
If in the nineteenth century the main energy source was coal and in the XX it was oil, in the 21st century it is likely to be a collection of inputs: Hydrocarbons, nuclear technology, renewable energyetc. The Jevons paradox can be applied to most of these energy sources: the drop in the price of solar panels and a favorable regulation leads to its expansion in homes and offices; The construction of modular reactors becomes an increase in the demand for nuclear technology …
Artificial intelligence, as a productive factor, could have a similar role. Or at least that’s what people like like Satya NadellaMicrosoft CEO. Nadella rescued Jevons to indirectly justify The stock market ‘piñazo that the majority of the seven magnificent and many other companies (including energy) before the presentation of the new Deepseek software, which uses less resources than US competition. “As the AI becomes more efficient and accessible, we will see that its use will shoot and become a consumption product that we will not tire,” he said in his X profile.
Is it true what Nadella says? Economic theory supports that, as it improves the technical progress of artificial intelligence, it becomes more accessible: it will use less energy and water, and will be cheaper to use. Now, what is not clear is how much impact the AI will have on the real economy and If there will be a roof in your consumption. Jevons himself warned, in part, the risks of his dependence. A notice for the magnificent seven.
The second reading of the Jevons paradox
He Book in which Jevons develops its famous theory is titled The question of coal: an investigation into the progress of the nation, and the probable exhaustion of our coal mines. The subtitle adventures which was The concern of the British economist.
Jevons warned that the strong dependence of the British coal empire could Assume your downfall. “In a mine there is no reproduction, and the product, once taken to the maximum, soon begins and sinks towards zero. While our wealth and progress depend on the higher carbon order, we not only have to stop, but We have to return, “he wrote in his book.
The prediction of the young Jevons was fulfilled: for the dawn of the First World War, the United Kingdom reached its coal extraction peak. Global conflicts and the development of new energy sources led to The decline of the British Empire to the detriment of other superpowers. Artificial intelligence, in this sense, can mean the “coal” of the 21st century and reach a roof in its consumption and its ability to improve economic and social well -being. Here the loser would not be the British empire, but a collection of technological companies, with Nvidia at the headwhich are putting all the eggs in the same basket.
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