By the way, as I pointed out to John Baez, one of the problems we have in addressing all these questions is that there are no good models of the economy. A good model would have to understand the flows of some funny things like people and sentiment. It would have to deal with money in a sophisticated way since it is peculiar stuff (because governments can and do print it, and maybe unprint it).
@Robert: Jevon's paradox is a great observation, much of the policies enacted by the government tend to have limited scope and thus only fix problems that arise in a partial equilibrium framework whereas Jevon's paradox extends the analysis to other markets in which the government participates through it's expenditures of its tax income and thus considers a more general equilibrium framework. However, whether or not the government will use the income to purchase or manufacture goods that expend as much, if not more, energy than the energy use that was taxed is unclear to me. In a perfect information setting where the government is perfectly informed as to the utilities of all generations and considers the welfare implications of the externalizes on all generations (perhaps discounting future generations to some extent), Jevon's paradox does not occur; but, the real world is a different story...9:00 am
Does Terry mind us having a private conversation under his buzz? Apologies if so.10:10 am