Sep 07 2016

Folkraed: A New Approach to Government – The Second Problem With the Way Things Are: Bad Voters

Category: books,economics,government,history,law,policy,politics,rightsJames @ 8:20 am

Last post we talked about problems with our politicians, but most voters aren’t any better. In fact, they’re often worse. Most politicians at least know something about the major issues of the day; most voters don’t.

Economists say that voters’ ignorance is rational: because each persons’ vote has such a small marginal impact on an election result, it doesn’t make sense to spend much time learning about the candidates or issues. What makes sense for each voter to do on an individual level, though, has disastrous consequences in the aggregate. The result is collective stupidity.

And rational ignorance isn’t the only problem—natural ignorance is too. Some people are dumber than others, yet everyone’s vote counts the same. Many good, sensible policies can’t be enacted because ignorant voters misunderstand them and oppose them on spurious grounds, often because the media and the entertainment industry have warped popular perceptions about what is right and true. Elected representatives thus sometimes can’t do what makes the most sense because ignorant constituents will vote them out of office if they do.

Surveys since the 1950s have consistently shown that most Anericans are poorly informed about basic, important civic facts about our country, government, and political situation. A majority of Americans were unable to answer sixty percent of such basic questions. Astoundingly, a majority of Americans didn’t know the answers to questions about

definitions of key terms such as liberal, conservative, primary elections, or the bill of rights; knowledge of many individual and collective rights guaranteed by the Constitution; the names or issue stands of most public officials below the level of president or governor; candidate and party stands on many important issues of the day; key social conditions such as the unemployment rate or the percentage of the public living in poverty or without health insurance; how much of the federal budget is spent on defense, foreign aid, or social welfare; and so on.*

Defenders of our current system may ask, isn’t having a republican form of government designed to solve this problem? We elect representatives who can inform themselves about the issues and vote for what would be best for us, so what difference does it make if voters are ill-informed? A lot, actually. How can an ill-informed citizen know how to pick the best representative in the first place? Indeed, research shows that people’s

political knowledge seems to increase citizens’ ability to consistently connect their policy views to their evaluations of public officials and political parties, as well as to their political behavior. For example, more-informed citizens are more likely to identify with the political party, approve of the performance of office holders, and vote for candidates whose policy stands are most consistent with their own views.**

Moreover, the better-informed demonsttate good citizenship beyond just choosing the optimal candidate or political party. Professor Michael X. Delli Carpini explained that

the larger literature strongly suggeststhat informed citizens are “better” citizens in a number of ways. Specifically, research has found that more-informed citizens are more accepting of democratic norms such as political tolerance; are more efficacious about politics; are more likely to be interested in, follow, and discuss politics; and are more likely to participate in politics in a variety of ways, including voting, working for a political party,and attending local community meetings. Research also suggests that more-informed citizens are more likely to have opinions about the pressing issues of the day, are more likely to hold stable
opinions over time, are more likely to hold opinions that are ideologically consistent with each other, and are less likely to change their opinions in the face of new but tangential or misleading information but more likely to change in the face of new relevant or compelling information.***

Beyond rational ignorance and basic stupidity, other voters vote against the public welfare act not out of ignorance, but out of naked self-interest, voting for benefits for themselves at the expense of their fellow citizens and future generations. The Baby Boomers have turned this into an art form.

To fix our system, we need voters who are informed, engaged, and public-spirited, rather than ignorant, apathetic, and selfish.

*Michael X. Delli Carpini, “An overview of the state of citizens’ knowledge about politics,” in M. S. McKinney, L. L. Kaid, D. G. Bystrom,  and D. B. Carlin (Eds.), Communicating politics: Engaging the public in democratic life, pp. 29-30, http://repository.upenn.edu/asc_papers/53

**Same, p. 35 (citations omitted).

*** Same (citations omitted).


Jul 14 2016

Folkraed: A New Approach to Government – Introduction

Category: books,economics,government,history,law,policy,politicsJames @ 10:45 pm

Many of us feel like something is going wrong. We feel a deep and growing unease we are moving in the wrong direction, that we’re becoming strangers in our own country. This series of blog posts is an extended essay that explains what is going wrong in the United States and what we can do about it.

But first you must realize that the solution won’t come from going back to the way things were. The past is behind us. Things will never be the way they used to be. But we can learn from the past. We can adapt and take from what worked before to make new solutions that fit our present circumstances.

As this series progresses, I may tweak my planned structure a bit, but roughly speaking it will start with a series of 12 posts each dealing with one of our current problems, followed by 12 more posts giving solutions. Finally, there will be some concluding posts discussing a few overlapping ways of implementing the solutions. When the series is all done, I’ll revise and compile it into a short book of about 100 pages.

It may be surprising that a written work about how to solve the most pressing political problems of our day wouldn’t be longer. But, more often than not, correct explanations and solutions are concise. Occam was on to something. And brevity has the added benefit of making this work more accessible and widely read. I provide footnotes for readers who want to explore these ideas in greater depth. If needed, and time permitting, I may follow up with a longer, more academic book that explores these ideas in more detail.

In this essay series, I am frequently critical of various institutions and actors in our political system. My intent is not to single out specific individuals who work within that system for criticism. In fact, I have worked in, or worked closely with people in, all three branches of government. The vast majority are decent, honorable people trying to do the right thing, as they see it. They are no different from the rest of us, and most of us would act the same way if we were in their position. The problem with our current system is not that it is run by bad people, but that the system has serious flaws that bring out the worst in us and encourage counterproductive behavior. The problem is not some nefarious cabal or conspiracy undermining our country, but rather that the incentives in our system lead to pathological results, in spite of all the good people working within it.

This essay might give the impression that I believe our government is terrible and irredeemably broken. On the contrary, our system is quite good. I feel lucky to have been born an American. I think we have one of, if not the best, systems of government in the world. If you look at the full scope of human history, I think you’d be hard pressed to find a better time or place to live than the United States in the 21st century.

But that doesn’t mean we shouldn’t work to make it better. It is not wrong to strive for improvement. Sometimes improvement for everyone only comes when the best strive for better. We have a long traditon of this in the United States. In colonial times, our ancestors enjoyed one of the highest standards of living in the entire world, better than those in England and most other countries.* Even taxes were lower in the 13 Colonies than they were in England. In 1765, per capita tax burdens in the American colonies were 25 to 50 times lower than they were in Great Britain and 6.5 to 13 times lower than they were in Ireland.** Taxes were seven times higher for Americans after independence than they had been under the British.***

From a purely economic perspective, taxation without representation was actually working pretty well for the colonists. But, we are not rational economic robots, seeking to maximize our prosperity at the expense of all our principles, and neither were the Colonists.  Things were good in the colonies, economically speaking, but the political system was unfair and rigged against them—it was taking away more and more of their power to govern their own affairs and transferring it to unaccountable elites in far-off London.

The system was unfair and could have been—should have been—better, so our ancestors fought to make it so. As one of the Minutemen who fought at the first battle at Lexington said, the colonists didn’t fight because of taxes or repression but because “we always had governed ourselves and always meant to. They didn’t mean we should.”*** The colonists fought to keep their right to govern themselves, because the British had been trying to take it away. And what they did set in motion a revolution in governance across the world. Ever since, the government they fought to establish has been an example to the world showing the way to freedom and prosperity. Let us seek to set that example for the world once again.

The next post will discuss the first problem with our system, a bad way of selecting our politicians.

* Jeremy Atack and Peter Passell, A New Economic View of American History: from Colonial Times to 1940, 2d ed., 1994, p. 50 (“[C]olonists in 1775 enjoyed a . . . standard of living . . . [that] made them among the richest in the world at the time . . . . This is borne out in the estimates of the height of Americans fighting in the French and Indian War [often used by econonic historians as a proxy for economic well being, given the relationship of diet to height]. At five feet eight inches, colonists were much taller than those in lower classes who had stayed behind in England rather than risk all in a transatlantic adventure, suggesting few, if any, serious dietary and nutritional deficiencies.” Americans have always been willing to take risks to improve their lot in life, even since the beginning.)

**Atack and Passell, p. 68

***Stanley Lebergott, The Americans, 1984, p. 40

**** As quoted in Lebergott, p. 39.


Oct 31 2011

Not Too Big to Fail

Category: economics,government,policyJames @ 9:00 am

What does it really mean for an institution to be too big to fail? The idea is that some banks and companies are so big and integral to the national economy that if they fail, it will cause disastrous ripple effects for the economy and cause a wave of bankrupt corporations and failed banks.

Proponents of this idea of “too big to fail” argue that the only solution available to government is to bail out distressed institutions which are too big to fail. Critics of this idea argue that the failure of these institutions would not be as disastrous as claimed.

This talk about "too big to fail" is probably nothing new to you. It certainly isn’t new to me. Like most people, I’ve been uncomfortable and angry about the huge amounts of money the government poured into failing institutions. I’ve never done much about it, because at the end of the day none of us average citizens have much say in this debate or in the resulting government policies. If you’re not a politician, government regulator, or bank executive, your opinion on the issue doesn’t count for much. After much thought about the issue, though, I’ve concluded that this doesn’t mean we’re powerless to influence the future of these big institutions, and I think that there are good reasons for us to exercise our power to change them.

The bailouts given out by the United States government were mostly done under the Troubled Asset Relief Program (TARP). The U.S. Treasury has spent over $200,000,000,000 ($200 billion) bailing out banks,1 and another $100,000,000,000 bailing out other institutions (such as AIG and the automotive industry).2

If they are too big to fail, then they are too big

Whether or not the TARP recipients were really too big to fail, something needs to be done. If these institutions are not really too big to fail, then it means their lobbyists are too powerful. It means that these institutions managed to fool the U.S. government into offering a huge unneeded bailout. If they managed to fool the government so badly, then we must make these banks smaller to ensure the health and vitality of our democracy.

But even if the banks really were too big to fail and TARP was a necessary program, we still need to make the TARP recipients smaller. When institutions become so big that they can rely on the government to immunize them from the consequences of their leaders’ bad decisions and stupid risks, we have a big problem. You don’t have to be an economist or social scientist to understand that programs like TARP will encourage executives at big banks to take bigger risks than they otherwise would – if the bank succeeds, it will reap the benefits (and the executives will get their bonuses), and if it fails, then the U.S. taxpayer will cover the loss.

Mervyn King, the Governor of the Bank of England (somewhat akin to the Chairman of the Federal Reserve in the United States), very aptly summarized the problem:

If some banks are thought to be too big to fail, then . . . they are too big. It is not sensible to allow large banks to combine high street retail banking with risky investment banking or funding strategies, and then provide an implicit state guarantee against failure.3

Part of the beauty of a properly functioning market economy is that competition prunes out the loser institutions. Poorly managed businesses will naturally fail, and the resources being put into those businesses can be freed up to be used more productively elsewhere. Nothing should be too big to fail. Failure is essential to the orderly functioning of the economy: poorly-run institutions should fail to make room for well-functioning institutions to succeed.

A Solution

It thus does not matter whether the banks were too big to fail or not. Either way, they are too big. When presented with situations like this, most people just say “someone should do something about that” and then ignore the problem. But politicians and government regulators have been completely unwilling to take drastic action, such as breaking up the big banks (which is what Alan Greenspan suggested4) or taking other less drastic steps to address the problem. If “someone” is going to do something about it, it has to be you and me!

But what can average citizens do? Here’s my solution: take your money out of the big banks. The only reason the big banks are so big is because people keep their money there. If lots of us started closing our accounts at the big banks and depositing our money somewhere else, the banks would get smaller.

Not Too Big

Let’s make sure that no banks is ever again too big to fail. The easiest way to determine whether an institution falls into that the “too big to fail” category is to see whether they received TARP funds. Each bank that received TARP funds had to fulfill the U.S. government’s TARP participation criteria. This means the government believed that the institution was too big to fail. And each bank that accepted TARP funds also implicitly acknowledged its belief that it was too big to fail. So if you want to stop banks form being too big to fail, here is all you need to do:

1. Find out if your bank received TARP funds. To find out, you can search for it here or look on this list. If you didn’t find your bank on the list, it is very possible that it still received TARP funds. A lot of smaller “local” banks are actually owned by larger bank holding corporations. For example, National Bank of Arizona is not really an Arizona bank. It is owned by Zions Bancorporation,5 which is the 34th largest bank in the United States, with over $51 billion in assets.6 You can quickly find out if your bank is subsidiary of a bigger bank holding company by doing a quick search on Google or Wikipedia (or even easier, just call your bank to ask).

2. If your bank is a TARP recipient, close your account with your bank. Make it very clear to them when you are closing the account that you are closing your account because the bank was a TARP recipient and that you are trying to do your part to shrink the size of the the bank to make sure that it will not be too big to fail, and thus a threat to our national economy (and, potentially, our political system). Be pleasant, but firm, and make it clear that you are not withdrawing your money to penalize or attack the bank, but out of a sense of civic duty to protect our national economy and the integrity of our system of government.

3. Third, deposit your money in a small community bank or into a credit union (these were the types of institutions that avoided making the risky loans that caused the financial crisis in the first place – we should reward theirresponsibility). Some people have claimed that having these big mega banks is good for the economy because they can achieve economies of scale. Well, credit unions consistently have better interest rates and lower fees than the big banks,7 so it seems like their small size hasn’t really been an obstacle to their efficient functioning so far.

4. The big banks derive a lot of their revenue from credit card use. If you have a credit card that has been issued by a bank that accepted TARP funds, consider canceling it and getting a card from a smaller institution. If you are worried about whether canceling the card will affect your credit score, then just stop using that card and start using a card from a small institution.

Addendum: this is not about anger

I started writing this post a few months ago, but never quite got it polished and ready to post. Since then, the Occupy Wall Street (“OWS”) movement has taken off, and along with it, a movement to penalize big banks by encouraging people to take their money out of the big banks and put it into credit unions. The people involved in this movement are explicit that they are motivated by their anger with the banks and the feelings that the big banks are acting unjustly. Anger against your fellow citizens (even if they are bank shareholders and executives) is a terrible way to motivate and sustain a political movement. Anger leads to irrationality. Anger divides communities and sets people against each other (for example, just look at the “53%” movement which has already formed in opposition to OWS).

The OWS crowd have even set up a Facebook event encouraging people to take their money out of the big banks all on the same day. If they’re actually successful in creating a mass movement, it is a recipe for starting a run on the banks. A run on the banks would just create a second financial collapse.

Let me be clear: what I’m advocating is not motivated by any animus for big banks, or by any desire to hurt them or penalize them. Like I said before, many big banks are actually bank holding companies that own a number of subsidiaries. Other banks are the product of growth or many acquisitions of smaller banks. We need a gradual and sustained movement to show the banks that, if things stay as they are, people will continue to withdraw their money. We don’t want all of the big banks to collapse – we want them to get smaller. A gradual and growing movement will give the big banks time to shrink in an orderly fashion, hopefully by spinning of their subsidiaries or by splitting themselves into smaller independent units.

This is about us normal citizens rationally taking actions to get the result our leaders have failed to seek, to make sure our country’s economy stays healthy and robust. Don’t take your money out of your bank because you’re mad. Take your money out because it’s the right thing to do to make sure that we never have a set of banks that are so big they can demand hundreds of billions of bailout dollars to survive.

If, like me, you’re concerned about the state of our economy, and the risks of continuing to have giant banks that can demand government largess to help them continue to operate, but don’t feel terribly sympathetic to the Occupy Wall Street movement, please help spread the word. You can do something to help our country without becoming an unproductive Angry Protester.




Footnotes


May 06 2011

Judging by appearances: sometimes it works

Category: Evolution,Evolutionary Psychology,law,policy,PsychologyJames @ 7:37 am

We’ve all heard that you shouldn’t judge a book by its cover. But a recent psychology study indicates that we may be able to make accurate judgments about certain aspects of people’s character “after minimal exposure to [their] physical appearance.” The study is titled “The Accuracy of Inferences About Criminality Based on Facial Appearance”1 and was performed by Jeffrey M. Valla, Stephen J. Ceci, and Wendy M. Williams of Cornell University and published in the Journal of Social, Evolutionary, and Cultural Psychology.

I learned about it from a blog post by Satoshi Kanazawa titled Criminals Look Different From Noncriminals.2 Kanazawa says the following about the study:

[C]ontrary to popular belief, you can assess people’s character and personality by simply looking at them. Nice people look nice, and nasty people look nasty, and it appears that humans have innate psychological mechanisms to tell them apart. Now, . . . a truly groundbreaking study, recently published in the Journal of Social, Evolutionary, and Cultural Psychology . . . show[s] that people can tell criminals and noncriminals apart simply by looking at their still photos. Criminals, it appears, look different from noncriminals.

In their experiments, [they] show pictures of the faces of 32 young Caucasian men in their 20s, without scars, tattoos or excessive facial hair, all in neutral expressions. Sixteen of them are convicted criminals, and the other sixteen are not. . . . [They] ask their experimental participants to indicate how likely they think it is that each man is a certain type of criminal . . . on a 7-point scale . . . .Their results from two experiments consistently show that individuals can tell who is a criminal and who is not, by indicating that they believe the actual criminals have higher probability of being a criminal than actual noncriminals.

However, their results also show that individuals cannot tell what type of criminals they are. . . . [C]riminals do not specialize. Men who commit one type of crimes are more likely to commit other types of crimes. . . . In empirical reality, there are men who commit (all types of) crimes, and there are men who do not. And Valla et al.’s experiments show that individuals can tell them apart because the two types of men look different.

There is one seemingly anomalous finding in their paper. In both experiments, women are unable to spot rapists. Women consistently rate convicted rapists to be less likely to be criminal than not only other types of criminals but noncriminals as well! While this may be initially puzzling, upon further reflection, it makes perfect sense. . . . In order to be a successful rapist, the man has to be able to fool the woman and earn her trust initially. Men who ‘fit the bill’ by looking like a rapist or otherwise criminal and dangerous would not be able to do that. They would not be able to get close enough to the women to rape them. This may be why women, but not men, are unable to spot rapists, even though women are equally good as men at spotting other types of criminals.

The photos and answer key are at the bottom of this post. Test yourself and see how well you do. My average rating for a non-criminal was 3.625, whereas my average rating for the criminals was 5.125. As the averages indicate, I was able to correctly categorize the faces most of the time.

Of course, there are other possible explanations why study subjects were able to differentiate between criminals and non-criminals. The sample size of people rating the photos was small (44 people), and as with many psychology studies, the study subjects who were rating the photos were college students, and were thus not a representative sample of the American public, let alone of humanity. Also, there may be subtle differences between the photos. Since the non-criminal photos were all taken as part of the same photo database; the offender photos appear to be mugshots from criminal offender databases. It could be that people were picking up on subtle cues stemming from the photos’ different origins, such as the quality of the photo, different lighting, different cameras, etc. The authors tried to measure and eliminate these extraneous factors. They asked the study participants if they thought it was obvious that certain photos were mugshots; none of the participants thought so. The authors of the study also tried to equalize the photos by removing the background and editing the photos to “maintain a consistent photo quality, and remove differences in lighting, graininess, photo quality, etc.” They also controlled for the level of attractiveness for each person.

It seems that the study authors tried to do all they could to account for all of the extraneous factors to remove, or control for, possible reasons for bias. I’d like to see the results of more studies like this to find out if they yield consistent results (the authors do cite a few old studies which had similar results). This study, though, at least offers some compelling results which we should consider.

I disagree with Kanazawa’s summary of the study when he makes the absolutist statement that “[n]ice people look nice, and nasty people look nasty, and it appears that humans have innate psychological mechanisms to tell them apart.” I had false positives and false negatives. I rated 6 of the 16 non-criminals as looking like they were criminals (meaning I gave them a rating of 5 or higher, on the 7-point scale); I also rated two of the non-criminals as neutral (a 4 on the 7 point scale), meaning that I thought it was equally likely they could be criminal or non-criminal. I rated two of the criminals as looking like they were non-criminal (rating them  a 3 or lower on the scale), and one criminal as being neutral. I identified all of the rapists as looking criminal. Taking the null hypothesis3 to be that a person is a non-criminal, I had therefore had 6 false positives and 2 false negatives.

Presumably, the evolutionary psychological explanation for our ability to categorize people by appearance is that our capacity to make visual distinctions between the criminals and non-criminals evolved so that we can protect ourselves. People with criminal tendencies pose a greater threat to our safety. We will thus naturally be more wary of someone who we suspect of having criminal tendencies, and take extra steps to protect ourselves. It makes sense, then, that that sort of capacity to differentiate would be biased in favor of false positives — protecting oneself from being harmed by a criminal would confer a greater evolutionary benefit than falsely believing someone to be a criminal since the harm from being victimized by a criminal would be more likely to cause death or serious injury than wrongly believing a non-criminal  to be a criminal. Since death or serious injury at the hands of a criminal would make it difficult or impossible to pass on one’s genes to the next generation, a capacity to tell the difference between criminals and non-criminals would likely evolve in favor of making false positives rather than false negatives.

What are the implications for this research? In day-to-day life, it probably means that you should put greater trust in your visual evaluation of someone’s danger to you. It also means that women shouldn’t trust their ability to tell whether a man poses a risk of sexually assaulting them, and take precautions accordingly.

More importantly, it means that juries in criminal trials are probably subconsciously biased against men who look “criminal.” It is difficult to remove such cognitive biases that are rooted in our biology and evolutionary history. Remember that in my case I incorrectly judged over one-third of the non-criminals to be criminal. Innocent people shouldn’t go to jail just because they look like a criminal. I think that one of the big implications for this research is that we need to study how we can make changes to the criminal justice system to make sure that juries aren’t unfairly prejudiced against defendants just because they look criminal.

And now, here are the pictures for you to rate yourself. Rate each person on a 1 to 7 scale, with  1 being people who look the least criminal and 7 being people who look the most criminal. The answer key is at the end. If you try it yourself, please post in the comments 1) your average rating for non-criminals vs. criminals; 2) how many false positives and false negatives you had; 3) whether you classified the rapists as looking criminal or not.

 

Answer key:
Non-Criminal: 1, 2, 6, 7, 9, 12, 13, 14, 15, 17, 18, 19, 22, 25, 26, 30;
Criminal: Arson – 5, 10, 16, 20; Assault – 4, 24, 27, 28; Drug Dealing – 8, 11, 21, 29; Rape – 3, 23, 31, 32

 

The images and answer key come from Jeffrey M. Valla, Stephen J. Ceci, and Wendy M. Williams, “The Accuracy of Inferences About Criminality Based on Facial Appearance,” Journal of Social, Evolutionary, and Cultural Psychology. They are reproduced in conformity with  the fair use exception in U.S. copyright law, 17 U.S.C. § 107.

 

Footnotes

1 Jeffrey M. Valla, Stephen J. Ceci, and Wendy M. Williams, “The Accuracy of Inferences About Criminality Based on Facial Appearance,” Journal of Social, Evolutionary, and Cultural Psychology


Feb 24 2011

More Priuses Won’t Make Much Difference (Fewer Suburbans Will)

Category: cars,Energy,government,policy,United StatesJames @ 7:41 pm

It is common to hear people say that we need more Americans to drive Priuses, hybrids, and other cars with good mileage. But measuring fuel efficiency by miles per gallon (MPG) is worse than useless: it’s misleading. It makes it almost impossible to easily compare cars and figure out how much fuel each car will really use.

We Should Focus on Minimizing the Fuel We Use, Rather than on Maximizing the Distance we Can Drive

We use MPG in the United States to measure a car’s efficiency. As you probably know, MPG measures how far a car can go on a given amount of fuel. This means that MPG is a good way to measure efficiency if you’re trying to maximize the miles you drive. MPG is not the best measure of efficiency, though, because most people drive a similar number of miles per week. According to the Federal Highway Administration’s National Household Travel Survey, the average miles driven per driver per day is consistently about 31 miles per day during the week (27 on Saturdays and 22 on Sundays).1 Demand for gasoline is inelastic: as gas prices change, the quantity purchased by drivers does not change very much. 2 I think that this is because people rely on their cars for transportation, and can only cut the distance they drive costs so much, since they still need to go to work, shop for groceries, etc. So, really it is not demand for gasoline that is inelastic, but demand for a given amount of transportation.

Because people will tend to drive the same amount, regardless of the cost of gasoline, then all other things being equal, most car buyers will still try to maximize their car’s efficiency. Thus, whether they like SUVs or compacts, if car buyers have two options that are identical in every respect except for different fuel efficiency, I think that most of them will choose the car with better fuel efficiency. Of course, different car models are never exactly identical, and fuel efficiency is just one of many factors a buyer will consider. MPG does not give car buyers the best information to make an informed choice. Since the miles we drive is usually pretty constant, what most of us should want to do is to minimize the amount of fuel we use to go a given distance, rather than maximize the miles we can go on a given amount of gasoline.

There are other good reasons for us to focus on decreasing fuel consumption, rather than maximizing the miles we drive. At the national level, many Americans would like our country to decrease its dependence on foreign oil. Assuming that domestic oil supplies stay constant, the only way to do that is to decrease the petroleum we consume, not to maximize the miles we drive. Similarly, most people would like to minimize the pollution created by automobiles. Since the number of miles driven is pretty constant, using less gasoline per mile driven is a great way to accomplish that.

MPG is Inadequate

MPG isn’t the best way to help people understand the best ways to minimize fuel use. It is deceptive because it obscures the real differences in efficiency between cars. When people buy cars, they tend to think that the improvement in fuel consumption between a 10 MPG car and a 15 MPG car is the same as the improvement between a 15 MPG car and a 20 MPG car. This is not true. As MPG increases at a linear rate, the improvements in fuel efficiency decrease at a hyperbolic rate. This means that the greatest gains in fuel efficiency don’t come from building more cars with very high MPG, but by replacing the cars with very low MPG. To help new car buyers better grasp this, instead of using MPG, we should rate cars based on how many gallons it takes to go a given distance, such as Gallons per 1,000 Miles (GPM).

The following table helps illustrate why GPM is a better measure. The table gives us a comparison of a set of hypothetical cars. The first column shows the MPG of the car. The second column shows GPM, or in other words, the gallons of fuel it would take to drive 1,000 miles in that car. The next column shows the amount of gas saved by driving this car instead of driving the worst car (in our chart, a car with 10 MPG, which is the MPG for city driving of a 2011 Chevrolet Suburban3). The next column shows the incremental amount of fuel saved by driving this car instead of the car listed just above it in the chart. As you can see, the fuel savings from switching from a 10 MPG to a 15 MPG car is 33 gallons. The savings from going from a 20 MPG car to a 25 MPG car is 10 gallons. To save 10 gallons from a 50 MPG car, you’d have to switch to a 100 MPG car. There are rapidly diminishing returns for developing cars with ever-higher MPG.

This graph shows how quickly the fuel savings tapers off. The x-axis shows miles per gallon. The y-axis shows the gallons of gasoline used to travel 1,000 miles. As you can see, there is a steep drop off from 10 MPG up to about 25 MPG. After 25 MPG, the curve’s slope decreases significantly (meaning that you get less and less fuel savings from each improvement in MPG), and after 50 MPG, the curve flattens out considerably (meaning that the fuel savings become pretty minimal).

A Hypothetical Example

An example might help show how big a difference using GPM can make. There are about 250 million cars in the United States.4 Cars in the United States average about 17 MPG.5 To simplify things, let’s imagine a hypothetical world where all cars in the United States either get 30 MPG or 10 MPG. To get an average of 17 MPG, this would mean that there would be 87.5 million cars that get 30 MPG and 162.5 million cars that get 10 MPG. Assuming that people drive an average of 900 miles per month, in our hypothetical example the United States would be using 17.28 billion gallons of gasoline per month.

Now let’s assume that we want to increase the country’s average MPG to 20, but only by changing one of the two types of cars. If we did this by increasing the MPG of the 30 MPG cars, we would have to increase them to 38.5 MPG. After this change, the total fuel usage would be 16.67 billion gallons per month, which would save 584 million gallons of gasoline.

If we decided to increase the MPG of the 10 MPG cars (but leave the 30 MPG the same), we would have to increase them to 14.62 MPG. After this change, the total fuel usage would be 12.63 billion gallons per month, which would save 4.65 billion gallons of gasoline. The net change in average MPG would be the same, but increasing the efficiency of the 10 MPG saves almost 8 times more fuel than changing the 30 MPG cars.

Conclusion

So what does this all mean? Are programs like Cash for Clunkers a good idea, since they encourage people to replace low MPG with high MPG cars? No. There are considerations other than fuel efficiency to consider (such as the inefficiencies involved in destroying still-functioning cars and then manufacturing their replacements). Cash for Clunkers produced a net loss for the economy – for each car in the program, the total costs outweighed the benefits by $2,000.6 Accounting for all of the costs and benefits, the program thus lost $1.4 billion.7 A study by Edmunds indicated that the program cost $24,000 for each new car sale it generated.8 Additionally, because manufacturing a new car uses significant resources, replacing an already-existing functioning car with a new car causes waste that is difficult to offset, even considering the newer car’s greater fuel efficiency.9

The best thing we can do is make information about GPM easily available to car buyers, so that they can make better-informed decisions when they’re buying a car. It is easy to calculate – all you do is take the reciprocal of the car’s MPG (divide the MPG by 1), and then multiple it by 1,000:

The U.S government requires car manufacturers to list MPG for city and highway driving on cars. It would make a lot more sense to require that they list GPM.

Until it becomes standard to list GPM information for each car, though, you can at least calculate it out yourself and become a more informed car buyer.

 

Footnotes

1 http://nhts.ornl.gov/tables09/ae/work/Job13285.html. Here is the data for each day’s average miles driven: