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The growing cost trap: What is it and how to avoid it?

What if investing in high-efficiency products led us to increase total consumption? Although it is counter-intuitive, we can fall into the growing cost trap and find that we consume more than before... How can we avoid this?

In 1865, William Stanley Jevons realised that coal consumption had increased dramatically, all despite the fact that James Watt's steam engine was much more efficient than Thomas Newcomen's. In other words, much more was being spent than before, despite the fact that the efficiency of processes and machinery had improved remarkably. How was this possible?

The truth is that this type of consumption pattern is not exclusive to the 1800s, but today homes can also suffer this phenomenon with the arrival of an increasing number of devices in our lives.

 

What is the growing cost trap?

Many of us can’t seem to save when we get a salary increase or when a major expense is eliminated (for example, when we stop paying for our car). We have extra money that, without realising it, disappears and we incorporate into our daily consumption.

But why does this happen?

The key concept here is the so-called growing cost trap.

We have the ability to spend more due to the increase in purchasing power, either due to higher income or lower costs. That is, we spend because we can adjust to a higher expense.

This is why when someone wins the lottery, they rarely keep their fortune for many years. Something similar happens with salary increases.

We are used to a certain level of spending, be it more or less, and this is also true of many habits that we acquire with technology. If we move up a level, we do not maintain spending, but we tend to match it to the new starting point.

For example, we tend to consume more if we notice that we have more money saved up or more money available in our pocket.

We see the same trap of increased spending when the price of the object we spend on is cheaper, even slightly. This is the case of low-cost fast food. The falling prices have led to an increase in the amount of food of this type that is eaten; or in the case of internet consumption, in the number of gigs that telephone companies give us for the same rate, which always seem to fall short despite continuing to increase.

This same behaviour is also transferred to energy consumption in the home, with users who tend to spend just because they can (they leave lights on, do not switch to LEDs, do not turn off the oven minutes before the food is finished cooking, etc.) without realising that a change in habits could give them significant benefits in personal savings.

Similarly, despite the fact that we have devices that improve and facilitate our day-to-day lives in ever smarter ways, we still do not optimise our resources in order to help us save. The arrival of a device that helps us efficiently is not always synonymous with reducing costs.

The Jevons paradox: Can we reduce consumption?

 

The Jevons Paradox has been a proven fact for centuries, long before everything depended on electricity. This occurs when the energy consumption of a device decreases but its use increases, so that consumption ends up being higher than we started with: since it consumes less, I buy more, therefore consuming more.

As we mentioned before, one of the first times we saw this effect was with the arrival of the steam engine. The early models were highly inefficient, and therefore expensive to operate, but by the time their efficiency increased, the cost dropped enough that it was installed everywhere, such as factories and locomotives. The same has happened with electrical appliances or computers.

Today we can be silent victims of this same paradox when we neglect the electrical consumption of a device, such as a computer screen. If our screen consumes 200W and a high-efficiency one consumes 110W, we could fall into the paradox of spending more (because we buy a second unit for another room or a second monitor) under the reasoning that “it's worth it because it's more efficient”.

And although it is certainly more efficient, doubling the device in this case will bring us up to 220W, a 10% increase in our total consumption. We may think that we would never fall into this trap, which is likely, but consider how the number of home automation devices has increased in recent years.

What should we be careful of?

We may not be buying two screens when they significantly improve their efficiency, but today we have a wide range of devices waiting to enter our home, all of them with small or very small consumption, called phantom consumption, but which could give us a surprise on the bill when added up.

We are talking about smart speakers, air conditioning control hubs, robot vacuum cleaners, electronic measurement systems such as thermostats, alarm sensors, smart lights, smart mirrors and so on.

The robot vacuum cleaner may be a comparable example to the steam engine, because before it was invented the driving force of carriages and brooms were animals (horses and people, respectively). How much electricity does a broom consume? Zero, such that any increase in domestic efficiency that we express through the purchase of a vacuum cleaner leads directly to the Jevons paradox.

This also includes the vacuum cleaner. We could make the mistake of thinking that a robot vacuum cleaner consumes less than the classic cable vacuum cleaner (true at the power level). However, let's bear in mind that with robot vacuum cleaners we have replaced the weekly cleaning at the weekend with a daily automatic cleaning as soon as we leave the house, so our energy consumption may be higher.

Jevons' limit: we don't need two fridges

That said, we can also find some examples where this has not happened (at both the domestic and urban levels), such as the replacement of incandescent lights with LEDs. It is estimated that LEDs are capable of using almost all the electrical energy and converting it into light, compared to an incandescent lamp which uses 5-15%, but at the same time there is a maximum number of light points at home. We are not going to install any more lights if we can already see well.

Another partial example is stabilisation for certain electrical appliances. The market for refrigerators, for example, is not going to be greater than the market for homes or, in other words: we do not need two refrigerators at home (usually). If we change the one we have for another with a better energy efficiency label, we will not buy a second one and we will notice the improvement in savings.

It could happen that, since we consume less to cool our food, we decide to lower the target temperature and, consequently, end up spending more. This is a prime example of a growing cost trap, as is improving the efficiency of air conditioning and ending up using it a lot more.

Another case is, for example, that of new household or urban gadgets, such as scooters.

As with the robot, electric scooters are not replacing the use of combustion vehicles. People who previously walked at zero cost or used public transport (which is highly efficient, by the way) now use scooters for short trips, with the consequent energy expenditure.

How to solve these consumption paradoxes?

Having an effective home economy, seeking efficiency in every way and, above all, being aware of your expenses.

We might think that the growing spending trap and paradoxes such as Jevons' paradox address personal or domestic issues, but the truth is that they affect companies, countries and organisations of all sizes, mainly due to tunnel or short-term vision, and to not taking into account the possible increase in consumption. And this is the key.

"Improve your consumption by having an efficient domestic economy, seeking efficiency in every way and, above all, being aware of your expenses."

Long-term vision, investment and objectives

It is possible that we want to spend on two screens, a sports car, or to go on a long holiday with our family, perfectly valid personal reasons that take into account an increase in spending, but always being aware that this spending is growing. Probably the most important point is that of being aware of that extra spending and of what we are getting in return.

So, for example, there are profiles for users who prefer to increase energy consumption in their homes to gain thermal comfort throughout the year, without their choice being due to an error (it is simply a usage preference); but there are also families that buy consumer items such as electric radiators because they are affordable and then wonder why the expense increased.

In summary and, ultimately: Be aware and be efficient.

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