Decreased price of LLM training will itself increase utilization - Jevons’ Paradox
Jevons’ Paradox, named after the English economist William Stanley Jevons, describes a situation where technological progress increases the efficiency of a resource’s use (thereby decreasing the unit cost to utilize that resource), but this leads to an increase in the overall consumption of that resource, rather than a decrease. Here’s how it works in more detail:
- Historical Context: Jevons observed this paradox in the context of coal usage in England during the 19th century. He noted that as steam engine efficiency improved (making coal use more efficient), the demand for coal didn’t decrease; it actually increased because the lower cost of energy made it more accessible and desirable for wider use.
- Core Concept: When the efficiency of resource usage goes up, the effective price per unit of service from that resource goes down. This reduction in cost can lead to an increase in demand because:
- The resource becomes more affordable for existing uses.
- It enables new uses that were previously not economically viable.
- It might encourage increased usage simply because the cost barrier is lower.
- Examples:
- Energy Efficiency: More efficient light bulbs or appliances might reduce energy use per unit, but if the cost of using these devices falls, people might use more lighting or run appliances longer, thus increasing overall energy consumption.
- Water Use: Efficient irrigation systems might reduce water use per crop, but if the cost of watering goes down, farmers might irrigate more land or grow crops that require more water.
- Implications:
- Environmental Policy: This paradox has significant implications for environmental sustainability strategies. Simply improving efficiency might not lead to less resource depletion if not coupled with policies that manage or cap total usage.
- Economic Policy: It suggests that efficiency gains in production might lead to increased consumption unless there are mechanisms in place to curb demand or incentivize conservation.
- Counteractions: To mitigate Jevons’ Paradox, strategies might include:
- Regulation: Setting limits on total resource use.
- Pricing Mechanisms: Increasing the price of the resource through taxes or cap-and-trade systems to offset efficiency gains.
- Behavioral Changes: Encouraging societal shifts towards less consumption through education or cultural change.
Jevons’ Paradox thus illustrates a counterintuitive outcome where attempts to use less of a resource through efficiency can sometimes result in using more of it. This concept is crucial in discussions about sustainability, resource management, and economic policy.
The following update of expert opinion, regarding the impact of Deepseek specifically, is well summarized below
!(https://us1.discourse-cdn.com/motleyfoolfree/original/3X/e/0/e04b5422f93b1b1ff64f67fa57b0c86a7b790fe3.jpeg “DeepSeek R1 - The Chinese AI “Side Project” That Shocked the Entire Industry!”)
DeepSeek R1 - The Chinese AI “Side Project” That Shocked the Entire Industry!
Best
Jason