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Jevons Paradox: What Oil, Coal and AI Have in Common.

Sep 5, 2023

In 2006, British mathematician Clive Humby popularized the phrase “data is the new oil.” He argued that just as oil powered the Industrial Revolution, data drives today’s information economy. But raw data, like unrefined oil, isn’t all that useful. Humby also noted that controlling large datasets grants significant economic and political power, just like owning large oil reserves did (and does). While the metaphor endures, it’s crucial to remember that data differs from oil in fundamental ways—it can’t be depleted and doesn’t get used up.

Back in 1865, British economist William Stanley Jevons identified what we now call “Jevons paradox.” He observed that technological gains in resource efficiency often lead to increased resource consumption. When people worried England would run out of coal, they thought more efficient steam engines would reduce coal use. Jevons disagreed, insisting that efficiency increases consumption, not decreases it: “It is a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth.”

Fast forward to today’s debates about AI and job displacement. While it’s true that AI will spawn new kinds of work (just as Jevons couldn’t have foreseen data scientists or influencers), I think we’re witnessing another instance of Jevons paradox.

Fueled by data—the new oil—and propelled by increasingly efficient AI—the new steam engine—we’re making tasks like accounting, data analysis, and content creation more affordable and accessible. Instead of spending hours upon hours grappling with TurboTax on your own, you’ll employ an AI-backed accountant to maximize your tax return. Instead of one report from your data science team, you’ll get twenty, each finer-grained than before. And you’ll update your website constantly, tailoring it for specific customer groups.

AI will augment jobs but is unlikely to completely automate them. We ought to focus our energy less on the dystopian future of mass unemployment, but rather the question of how we reconfigure our organizations to be ready for a future which, once more, follows Jevons insights from nearly 160 years ago. (via Pascal)

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