Jevons paradox

Plain English. William Stanley Jevons observed in 1865 that more efficient steam engines increased Britain's coal consumption rather than reducing it: efficiency makes each use cheaper, which expands the set of uses worth attempting, until total demand outruns the saving.

Why it moves money. It is the standard bull case for compute. Every efficiency gain — cheaper tokens, sparser models, better quantisation — gets cited by bears as demand destruction and by bulls as Jevons fuel. The evidence so far favours the bulls: as working software "comes out of a tap", personal and enterprise demand for it compounds, and Goldman Sachs projects global token processing rising from 1.7 quadrillion a month in mid-2025 to roughly 120 quadrillion by mid-2030 (projected), mostly agentic. Anyone modelling inference demand off current usage is anchoring to the pre-tap world — that is the paradox's investable content.

What to watch. Whether aggregate token volumes keep outrunning price declines — the paradox holds only while latent demand exists. The falsifier is a period of falling prices and flat volumes; nothing published yet shows one.

From the signals. Jevons arrives: as software comes out of a tap, demand explodes. Cheaper tokens drive more tokens, at the mint level. Goldman expects 120 quadrillion tokens a month by 2030.

Further reading. Jevons paradox.