The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies

by Erik Brynjolfsson

On the other hand, when demand is very elastic, greater productivity leads to enough of an increase in demand that more labor ends up employed. The possibility of this happening for some types of energy has been called the Jevons paradox: more energy efficiency can sometimes lead to greater total energy consumption. But to economists there is no paradox, just an inevitable implication of elastic demand. This is especially common in new industries like information technology.21 If elasticity is exactly equal to one (i.e., a 1 percent decline in price leads to exactly a 1 percent increase in quantity), then total revenues (price times quantity) will be unchanged. In other words, an increase in productivity will be exactly matched by an identical increase in demand to keep everyone just as busy as they were before.