Auto companies have made great strides in improving engine efficiency in recent decades. But those improvements haven’t done much to improve the fuel economy of America’s passenger car fleet. Instead, consumers have “spent” most of those efficiency improvements on bigger, faster cars.
MIT economist Christopher Knittel has carefully quantified these tradeoffs in a recent paper in the American Economic Review (pdf; earlier ungated version here). As noted by Peter Dizikes of MIT’s News Office:
[B]etween 1980 and 2006, the average gas mileage of vehicles sold in the United States increased by slightly more than 15 percent — a relatively modest improvement. But during that time, Knittel has found, the average curb weight of those vehicles increased 26 percent, while their horsepower rose 107 percent. All factors being equal, fuel economy actually increased by 60 percent between 1980 and 2006, as Knittel shows in a new research paper, “Automobiles on Steroids,” just published in the American Economic Review.
Thus if Americans today were driving cars of the same size and power that were typical in 1980, the country’s fleet of autos would have jumped from an average of about 23 miles per gallon (mpg) to roughly 37 mpg, well above the current average of around 27 mpg. Instead, Knittel says, “Most of that technological progress has gone into [compensating for] weight and horsepower.”
This is a fine example of a very common phenomenon: consumers often “spend” technological improvements in ways that partially offset the direct effect of the improvement. If you make engines more efficient, consumers purchase heavier cars. If you increase fuel economy, consumers drive more. If you give hikers cell phones, they go to riskier places. If you make low-fat cookies, people eat more. And on and on. People really do respond to incentives.
4 thoughts on “How Do Consumers Spend Engine Efficiency Advances? On Bigger, Faster Cars”
Actually fuel economy would have increased by 37.8 percent. One should use fuel per mile and not miles per gallon to compute fuel savings. So for every 100 miles driven, at 23 miles per gallon, the car will us 4.35 gallons. At 37 miles per gallon, a car driven 100 miles will use 2.7 gallons. The fuel savings is 1.65 gallons per 100 miles or 1.65/4.35 or 38 percent fuel savings. The fuel savings is not the 60 percent as mentioned by Knittel. It is a common error caused in part by the unfortunate use by the EPA of miles per gallon instead of gallons per mile.
I am surprised AER or reviewers did not ask for a change.
Just think of an engine performance improvement from 30 mpg to 60 mpg. Under EPA and Knittel’s math that is a 100 percent energy improvement usage. In other words, the car no longer needs gas to run since it uses 100 percent less gas.
Gallons per mile does not increase as fast as miles per gallon. Going from 30 to 60 mpg is a 100 percent improvement in mpg but only a 50 percent improvement in gallons used per mile.
We care about the number of gallons of gasoline we use, gallons per miles, not mpg. Using fewer gallons is the energy efficiency and environmental goals.
If EPA used gallons per mile instead of mpg, consumers actually would see how few gallons we save in government mandated fuel economy measures for driving an so called energy efficient auto.
Milton – Thanks for catching that. As you say, it’s an important point. Here’s a link to a nice study in Science in 2008, “The MPG Illusion”, that addresses this: http://www.waccobb.net/forums/showthread.php?38094-The-MPG-Illusion.
If you make work more efficient and productive with computers, the benefits get spent on emails…
People don’t design the cars they buy. Corporations design cars with the most possible profit margin then market them to dolts who spend their days immersed in football games and beer commercials in a fantasy existence lived inside a big screen television inside an overpriced McMansion that they are upside down on a 30 year mortgage for. Is it any wonder these people have no critical thinking skills and will buy pretty much anything the auto companies sell them?
These people are driving cars they can’t afford to work at jobs they hate, to pay for homes that are too large to heat, and cool, and clean, so they can live like the people on tv, swimming up to their necks in high interest rate debt.
Lemmings that need big cars to protect them when they text behind the wheel and run into school buses and walls and trees.
The disease runs deep, and fuel economy ignorance is only a symptom of a terminal malady of a lifestyle in denial. Check out the average weight of the drivers, they couldn’t fit in a normal seat if their lives depended on it. I watch the fat trolls driving with their bellies so their hands are free so they can use them to eat fast food as they drive in their SUVs and pickup trucks. Life in America’s become a bad Monty Python sketch.
The weight goes up, the IQs go down and the entire country goes bankrupt paying for imported oil and chinese junk, this ain’t rocket science, its madness.
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