SOLID-STATE lighting, the latest idea to brighten up the world while saving the planet, promises illumination for a fraction of the energy used by incandescent or fluorescent bulbs. A win all round, then: lower electricity bills and...less climate-changing carbon dioxide belching from power stations.
Well, no. Not if history is any guide. Solid-state lamps, which use souped-up versions of the light-emitting diodes that shine from the faces of digital clocks and flash irritatingly on the front panels of audio and video equipment, will indeed make lighting better. But precedent suggests that this will serve merely to increase the demand for light. The consequence may not be just more light for the same amount of energy, but an actual increase in energy consumption.
There's 2 big problems with this.
- Light is what is being purchased, not power.
- The word "merely".
If I understand right, decreased cost of light (not power) will result in an increased use of light, for sure. However, the details of the light demand curve, and the details of the cost structure of the light will determine net power usage devoted to light.
While the demand for light will almost certainly go up, so too will the power usage of the light we're currently using go down. It's not hard to picture a world in which the (substantial) cost savings (97%?) on electricity from good LED lighting mean that our existing lights save 97% of their power cost, and we then only use double what we were using, thus saving 94% of power usage on lighting. Perhaps that edges up over time. But the "merely" is highly deceiving.
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Going from memory, in the days of candles and firelight a middle class class family would spend 5% of their income on light.
Poor, flickering light that it would probably be considered child abuse to make your children read in these days.
Today light is much, much cheaper. And yes we use much more light, of much higher quality. But does ANYONE spend 5% of their income on light? And we are expected to think that the spending on light would INCREASE?
The question from Mankiw is ... would power use increase. I think it would be a real hard sell that total light $ would increase...right now light is close enough to free that it seems unlikely that further decline of price is worth talking about in terms of increased usage. BUT I'm wrong a lot. But I'm sure a proper economist can pull an example out of their ear of just such a case.
OTOH, the power issue seems 100% far-fetched to me. 97% decrease, or even 67% decrease in cost doesn't usually create a 3-30x increase in usage. Usually, it doubles usage, and then extra dollars get re-allocated because of Diminishing Marginal Utility and Opportunity Cost.
But I'm not a famous econ textbook author.
My point was that "power" is (these days) an approximation of the cost of using light. Mankiw is using this argument, as he argues that use of light would go up because it gets cheaper.
And we have historical data to show that when the price of light falls, (not just by a factor of two as we think might happen, but by a few factors of 10) that the usage does not increase sufficiently to increase the total cost (read power usage).
And if the historical record shows this, starting from a situation where we were clearly NOT saturated in our light usage, how much more would this apply now when I'd say we are approaching saturation?
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