What is the Khazzoom-Brookes Postulate? — Exponential Economy #13 (Video)
By: Rafael Badziag
Tags: Videos, Entrepreneurship, Business, Economy, Exponential Economy

In this episode of the series Exponential Economy I explain the Khazzoom-Brookes Postulate.

Watch this video:

Video transcription:

Hi, today from the sunny Black Forest

Today in the series Exponential Economy we will be talking about the Khazzoom-Brookes Postulate

What it is? You will find out in the next part. See you after the break.

Khazzoom Brookes Postulate. What is it?

Before I’ll explain it to you, I ecourage you to subscribe to my newsletter

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So, let’s come to the main topic

Khazzoom-Brookes Postulate is generally an application of the Jevons Paradox

in the field of energy

It generally states that the increase of energy efficiency leads to an increase of energy consumption

and not to decrease of energy consumption

The name comes from the names of 2 economists, Daniel Khazzoom and Leonard Brookes

who examined the Jevons Paradox more in depth

and employed the reasoning of Jevons to the eneergy consumption

I was talking about the Jevons Paradox in the series “Exponential Economy” before

and you will find it below this video, I will put a link below this video in the description

So, watch that video, what Jevons Paradox is about

and now the two scientists Brookes and Khazzoom examined the strength of the rebound effect

in the case of energy

And also the other effects

And they realized that the rebound effect, meaning that the effect coming from the increased demand

for the energy is not 100%

It means that the increased demand for energy due to the cheaper energy use

does not out outweigh the decrease of the consumption due to increase of efficiency

So, the consumption goes down because of the increased efficiency

but it goes up again because now the use of that energy is cheaper

due to the increased efficiency

but it doesn’t go up 100% again, so we have a lower level of the consumption

at that microeconomy level

but then we get the macroeconomic effects and there are 2 of them

The first effect is that we have better profitability both on the producer side

and on the consumer side

and this leads to an economic growth

and economic growth, of course, causes more consumption in general

and specifically more energy consumption

this is the second effect and the other effect on the macro level is that we have some technologies

that have a bottleneck as to the energy efficiency

because there is no energy efficiency, some technologies can’t get employed or can’t develop

because they are either too expensive or maybe they are not viable

but if we get increase in energy efficiency, these technologies may actually deevlop and then they are like dependant technologies

that wait fo these technologies to develop and then these technologies can develop again

I mean it has a multiplier effect on other technologies, kind of cascading effect

and since all of these technologies can develop now, they of course consume more energy

And if you take together all these 3 effects, one on the micro level and two on the macro level

the energy consumption in the entire economy grows

A good example for this is what happened on the oil market, crude oil market

In 1970’s we had 2 oil shocks

In 1973 and 1979 where the price of oil went up and it forced some improvements in efficiency of car engines

on combustion engines

these improvements in energy efficiency were necessary to somehow limit the cost of driving a car

but instead of limiting the overall consumption they actually led to increase in the fuel consumption, as we know

and after 30 years we had the highest consumption of crude oil in history

If you consume less fuel per mile or per kilometer to drive a car, you will drive more, your use of that car will get higher

and then people will also prefer to use their own cars instead of public transport, that means that more cars will be bought

and this will drive the consumption again since it is cheap to drive a car, new services based on cars appear and more maybe products

and based on that, like taxi, like maybe Uber, as we know and of course other technologies develop, based on cars

like for example transportation cost goes down and this allows for example the busienss model of Amazon

So, paradoxically the increased energy efficiency leads to increase of energy consumption

This is what Khazzoom — Brookes Postulate proves and that what it all is about

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