Economics and cars

[Megabyte]

This is a slight rant, bear with me, because I'm feeling vindicated :)

Oh, and if you're too lazy to read this, don't bother responding as I'll just ignore/flame you.


An ongoing 8 month long project for one of my final econ requirements was a cost/benefit comparison between cars (specifically a hybrid vs other technologies).

Originally this started out as an analysis for my father, who was looking to purchase a new car. He commutes ~250 miles a day, 9 days every 2 weeks. I did this with him for about a year a while ago, and as a result we're bother ridiculously cost centric with our vehicles. Obviously this was an important buying decision for him, and he wanted to have all the info, but didn't have the time (or most of the practical knowledge) of how to put it together.

In California, the hybrid market is pumped up a LOT in advertising. Hell, you can hardly go an hour without a Prius ad someplace in Sacramento. My old man was eyeballing them, but wasn't convinced that they were all they were cracked up to be (with good reason, the utility he works for tends to be on the research and test end of those sorts of technologies).

However, after seeing the amount of info and discussion on the topic (my professor and most of my peers seemed into it) I decided to go a bit beyond the original scope and turn it into a total cost comparison. This was an extensive amount of work, detailing everything in comparison to 50 different vehicle models (new 2007's at the time).

Research and numbers aside, I took some extra effort in to actually obtain (legally) records of a number of car owners for 20 of the models from owners of them, and compared the information on what I could. This included maintenance, recalls, gas usage, wear and tear, prices for purchase, etc etc. Obviously using new models limited the extended maintenance, but I did what I could there.

The models were charted for mileage (listing both city/highway at $4.50per gallon) compared to the average american's yearly (as well as 2 other numbers, a 1.5 the average and my father's own estimated), average maintenance cost, realistic maintenance cost (i.e. customers notes multiplied yearly with other variables), purchase cost, and about another half dozen or so things that came to mind at the time.

I compared all the vehicles, but also compared them based on "level" of vehicle (i.e. higher end models vs higher end ones), technologies, and even add in a convenience factor based on certain technologies (i.e. it's pretty hard to find a electric vehicle recharge station in most places). In an attempt to be complete, as not all vehicles owners of the same type have the same costs, I gave the company's listed and basic estimates (if everything worked perfectly, and all parts/maintenance was done as scheduled), customer experiences with the variables (stated in the sheet and paper), and high end cost numbers (if high failures and parts did not perform to standards) in a basic low/med/high format.

End result, a really comprehensive spreadsheet and charting of the whole thing. The results, well, were clearcut. Hybrids were not an economical decision on any level in any form. On the dollar end, they ended up costing their owners for years (sometimes a decade or more) before they would break even with standard engine type vehicles.

The only possible close ones were the very high end models where entry level prices were +$25k. Actually, the most efficient models, by my charts, were certain clean diesel models which, ironically, don't meet a specific part of the California Emission Standards, and as such aren't able to be sold here new (almost impossible to find used, as well).




Well, a bit of a surprise to myself...my work got disregarded. My prof basically scoffed at it, unable to believe that this is the result. He was, unfortunately, one who disliked work that disagreed with his beliefs and opinions, and such gave me a c- for my effort. Mixed results amongst my classmates, those that took the time to read and follow the paper/spreadsheet ended up in total agreement while those that chose to follow my prof's stance, as such didn't read it, disagreed. I was pretty angry about it, as I stood by my work and was never given ANYTHING to indicate it was erroneous.

Months later, I've seen something interesting. Most notably, Wall Street Journal study on my exact topic. Their results? Well, not quite as comprehensive as my work, and with some different or missing variables ($2.79 per gallon as a gas variable, instead of my $4.50 and a lack of warranty/other financial concepts in their modeling), but pretty much the same results.

http://online.wsj.com/public/resources/images/EV-AA004B_HYBRI_20071026153657.gif

So, I emailed this, my original work, and several other research studies done by various groups throughout the country to this professor and several critics I noted of last. I just got a response from him, apologizing for the response and his reaction to the work. It's far too late to change my grade (and boy does that sting), but I feel a certain vindication in proving this guy wrong. I don't actively hate any of my profs over the years, but this guy was probably the biggest simpleton I ever had to do work for and I'm glad to have gotten this.

Link to the WSJ article...
http://online.wsj.com/public/article/SB119335110403372123.html

I'll see what I can do about posting a link to my old project, need to check and see if the dept has it righted to them since I never published it myself.

[Match Strike]

Did you take into account the externalities associated with gasoline usage?

[Lord Sesshomaru]

I'm impressed. You put quite a bit of work into this and I checked your math as well and that all adds up. Only thing I really have to say is have you ever driven a Prius? Garbage. They have so many blind spots on them and they're in all the worst possible places. When my Porsche was getting work done I rented a car to get around as it was going to be in the shop for over a month. I rented a Prius for the gas mileage, which was the only thing I found good about it, filling up only once when I had it, and that was when I had to return the car with a full tank of gas. I thought it was uncomfortable, performed poorly, and it just plain looked ugly. Now that I've seen your research, it gives me just another reason to think the Prius is a piece of garbage.

[KBHoleN1]

Good for you man, that's a lot of good work and it's a shame someone who is supposed to be of higher authority lets their own beliefs get in the way of their job. That is one of my biggest peeves, when teachers and professors can't see past their own ideas to give you credit for your own.

[BaxVarlet]

Did you take into account the externalities associated with gasoline usage?

On the other side, there would also be a sense of altruism by buying a hybrid car. Doing one's part for the environment and all that jazz. That would be hard to calculate though.

Plus, the damages due to externalities of CO2 emissions is largely debated.

[R G]

Good info...

Another thing that you might not have taken into consideration is the expected replacement of the hybrids cars batteries after a few years. This is will be a sizeable amount of money.

Hybrids are not what they are touted to be. Better would be some of the new diesels or even Honda's natural gas car.

[Megabyte]

On the other side, there would also be a sense of altruism by buying a hybrid car. Doing one's part for the environment and all that jazz. That would be hard to calculate though.

Plus, the damages due to externalities of CO2 emissions is largely debated.

Largely debated, to put it mildly.

First rule of economic thinking is to drop your morals/ideals and let the data do the talking. This isn't easy, and it makes economists very unpopular politically for most issues, but it's my preference because (in my experiences and knowledge) it best reflects reality. However, if there's no data, there's nothing to talk about (economically speaking).

If I could have obtained quantifiable, and verifiable, data ANYWHERE when it came to the pollution realm, it would have been included. To be frank, in all my research I was never able to come up with anything comparative or useful. Various groups, people, and organizations give info, but nothing that can be used beyond the scope of their individual statistics.

This isn't to say that such info will never exist, but it doesn't now in any accessible means. Whether this is by design or simple lack of knowledge, I won't say for a certainty (though from what I've learned I'd say it's the latter). My own bet from research is that pro-green thinkers wish to pander out this initiative and line of thinking, but that there's really nothing to back it other than your moral imperative and the idea of "doing you part." That's a personal opinion there, however, and not based on anything quantifiable.

So, to be frank, ideals are not an economic standard. It's not hard to calculate them, because they're not part of the equation. Beyond it being another line for company's to sell to you (the consumer) to buy their car there's no economic principle behind it.

[Megabyte]

Only thing I really have to say is have you ever driven a Prius?

Yeah, a few different years' models and setups for them, actually.

I thought the technological concept was interesting, and that the onboard ui system was pretty nice, but not much else of the rest of it.

Agreed on their performance, usually was about 75% of the claimed capabilities of the car. Pretty pathetic, and I think it'll be looked back upon as a really lousy vehicle in general 20 years down the road.

[Lord Sesshomaru]

Prius is to Toyota, what the Pinto is to Ford :p

[Ignition]

I could have told you that, sure I haven't put as much research into my out come. What I can tell you is you should try factoring weather and temperature into your findings.

Were I'm one of the farthest north living TAOers I can tell you that people I know who drove their hybrid year round would vouch for spending twice as much on fuel in the winter then would be spent on a regular vehicle.

[BaxVarlet]

I'm curious, did you offer solutions to this "problem" in your project?

Do you think a pigouvian tax on the auto manufacturers as applied to non-hybrid models would work? The added cost would of course be felt by the consumers, but if you could equalize the prices of hybrids and non-hybrids in the marketplace. I believe the majority of people would buy hybrids, especially due to the recent SUV hybrids and the rising gas prices.

[Realist]

Wikipedia (http://en.wikipedia.org/wiki/Hybrid_electric_vehicle#Comparison_of_regular_hybr ids_with_petroleum_and_plug-in_hybrid_vehicles) has an interesting section on this topic. Seems there are conflicting findings.

Perhaps you should approach the externalities issue from the other angle: How much would gas need to be taxed for hybrids to be worth it?

[BaxVarlet]

Perhaps you should approach the externalities issue from the other angle: How much would gas need to be taxed for hybrids to be worth it?

A think a tax on auto companies would be more efficient. We don't so much want to hurt people who already have non-hybrids, and have had them for years. We want to encourage buying hybrids instead of non-hybrids in the future.

[Realist]

A think a tax on auto companies would be more efficient. We don't so much want to hurt people who already have non-hybrids, and have had them for years. We want to encourage buying hybrids instead of non-hybrids in the future.

What we want is for the individual cost of gasoline usage to equal the actual cost of gasoline usage. The way to do that is to price the social cost into the individual cost; you do that with a gas tax. It doesn't matter whether someone improves the efficiency of their driving by 50% or just cuts their driving by 50%; both have the same effect, so both should be given the same reward.

[Megabyte]

Keep in mind Real, that my own analysis and comparison pitted the gas rate at $4.50 a gallon, and higher milage driven per year, with hybrids STILL showing the same results. For my own father, driving ~45-55k miles a year, there is actually a decrease in comparative value (making it take even longer for the hybrids to balance out).

Higher gas prices don't solve much in the term of issues with the hybrid models, they just cover over them. The topic as a whole takes a much broader scale than simply gas/oil prices.

I'm curious, did you offer solutions to this "problem" in your project?

What problem?


If you believe there was an underlying question or goal to the work, then your misreading my intention. I have no opinion on the technologies available for motor vehicles beyond their economic viability. With that in mind, I am not a supporter of hybrid vehicles now, nor do I see myself coming around to them in the foreseeable future.

This was an analysis and comparison between various modes/models/manufacturers, to see what came out where. The analysis speaks for itself.


If your aim is to promote hybrid vehicles, I do have 3 main ideas for those fronts, and adding taxes or burdens to anyone is NOT a viable solution in my book. It's approaching the issue of rising gasoline prices from the wrong direction (with the wrong intent as well).

The goal should be to make the hybrids more affordable, if you're trying to promote them, not force or trick people into it. Taxing gas prices to any upward amount won't change the underlying issues with the vehicles and the market, it'll only force us to pay more for gas.

Here are my thoughts on the subject of improving the hybrid market, overall...

1. Fix tax breaks on hybrids so they're not diminishing. Most models these days have no tax break on them at all. Shaving +$2k off the Prius again, in particular as it's at the lower cost end of the hybrid market, will go a long way to making it more practical.

2. Fix the pricing of hyrbrid models. Still too expensive for their benefits for most Americans.

3. Drastically improve efficiency. Particularly in highway and other faster driving modes, and overall lasting of the vehicle. This is the hidden killer in costs for these things, they're VERY expensive to maintain over extended periods and for drivers who aren't primarily city (even urban drivers).

Another note which occurred to me doing various studies after I did this project...

4. Stop Government incentive based involvement (outside of lowering taxes). Recent California bills like making hybrids able to drive in the carpool lanes (failed), free parking passes, etc, do not solve the underlying issues with these vehicles. They're basically lobby'd marketing ploys to make these things seem like a better deal, while providing negligible cash benefits to the consumer.

[Megabyte]

To Ignition, it was originally considered by me, but later dropped. The operating conditions for all customer based info from my study was for north Californians who lived with a varied temperature throughout the year (usually between as low as 20 in winter to +100 in summer). As a result, since the conditions were consistent for all vehicles, they were dropped as their own section.

Conditions either hotter or colder than the ones for them were beyond the scope of my studies as you're stepping into specialty customer needs then, based on region. It is important, and I'm curious to see the low temp performance specs of the hybrids, but regardless such a condition was outside of what I was originally researching.

Wikipedia (http://en.wikipedia.org/wiki/Hybrid_electric_vehicle#Comparison_of_regular_hybr ids_with_petroleum_and_plug-in_hybrid_vehicles) has an interesting section on this topic. Seems there are conflicting findings.

Not really conflicting.

I should note that the paragraph there is rather..incomplete with it's information. Love wikipedia, but it's hardly credible in and of itself as a source of important information.

It's also important to note that the cost of the vehicles mentioned in the Consumer report 2006 article are now equivalent, if not higher, to the actual original stated prices due to loss of tax breaks on them (so the initial report is more correct now, +5 years to break even in most cases). Lastly, in the cases of the models that are still recieving tax breaks, you'll see that the WSJ notes they come in at just under 5 years.

To my thoughts, when I originally read this comparison, it was overly generous to the hybrid models examined. Most of the research on this topic from all sources seem singularly focused on gas costs, ignoring all other costs for the vehicles.


As for the intellichoice.com mentioning *shrug* Never heard of their analysis, and never had it referenced before. Won't call it baloney, but disagrees with every other analysis I've ever seen. I'll make a note of it and remember to look it up sometime, but an analysis from a site I've never cared for on information isn't high on my priority list.

The final statements on that section agree with my above point, however, that tax breaks and financial incentives for hybrid buyers would make it more beneficial.

[Realist]

Megabyte,
I suspect your analysis is correct. I'm just wondering whether hybrids would become worthwhile if the actual cost of gasoline was equal to its full social cost. The goal is not to promote hybrids in particular; the goal is to reduce usage of gasoline.

[Megabyte]

Sorry for neutral phrasing in this thread, but part of the idea behind my work on this was total separation from any social or political agendas. It's inevitable that all knowledge be incorporated into such things, but my original aim was simply enlightenment of a given aspect in our lives. Speculation beyond that towards a larger goal actually never occurred to me while I worked on this (though I could hardly say that for anyone that researched it).

Anways, while outside the original point of my own research, I'd agree that is a pretty worthwhile (and necessary) goal in the long run.


For my thoughts, I don't think hybrids are the answer and feel that we should search in alternative technologies. Delaying the inevitable is simply how I see them, and not a very good delay at that. Currently, nothing that I've seen or heard of would seem to have real potential, so here's hoping for some new developments as far as I'm concerned.

[The Coder]

Megabyte,
I suspect your analysis is correct. I'm just wondering whether hybrids would become worthwhile if the actual cost of gasoline was equal to its full social cost. The goal is not to promote hybrids in particular; the goal is to reduce usage of gasoline.

I was just going to make that comment. I mean yes, it may not be as cost efficient to operate a hybrid, however is it worth it for the environment? Yes, it's only a small portion, but if a lot of people drop it a small portion, a big impact can be made.

[Megabyte]

I was just going to make that comment. I mean yes, it may not be as cost efficient to operate a hybrid, however is it worth it for the environment? Yes, it's only a small portion, but if a lot of people drop it a small portion, a big impact can be made.

Can it? Will it?

Again, I was unable to find anything reliable or comparable anywhere, be it online, in various databases, contacting a good number of organizations...you see where I'm going with this. No reliable or consistent data was ever brought to light, even when I released this project and was taking comments from others. At this point, I'm not convinced we even know enough about our environment to fully assess the causes of a pollution based problem (if there is one).


Just because someone tells you something doesn't mean it's true. Due to the setup of a hybrid vehicle's system versus a normal or diesel engine one, I don't doubt there is some sort of differences and less polluting emitions.

The question is, how much of a difference? How significant an improvement do we see? What emissions can we expect a reduction on? What effect do these emissions have, and in what amounts does it take to have that effect?


Save the earth, you hear the hype, where's the data?

There's a LOT of ignorance on this topic, and I'm unwilling to commit to a morally imperative concept (i.e. hybrids will help save the environment, so are worth a higher cost) without something to show that it's the right choice.

[Realist]

I've never been impressed by hybrids myself--seems to me a patchy feel-good solution. These things do more bad then good in a way, since it makes people feel they are doing something to help when they really aren't. But I do think if we tried to tax emissions at their real cost, we would see a lot of inventive solutions that we do not yet, perhaps including increased use of hybrid cars.

As for how to determine this real cost, a superficial search by me can't find much research on the subject! Maybe it's a project I'll undertake myself. There is a lot of data on the effects of pollution on various aspects on the environment, but little in converting this into practical cost metrics. It's a worthwhile activity to pursue.

[Megabyte]

As for how to determine this real cost, a superficial search by me can't find much research on the subject! Maybe it's a project I'll undertake myself. There is a lot of data on the effects of pollution on various aspects on the environment, but little in converting this into practical cost metrics. It's a worthwhile activity to pursue.

A worthwhile endeavor, though one that'll likely take a degree and studies into environmental sciences. Hopefully we'll someday understand our environment to the degree where the effects of our actions are fully known and understood.

My girlfriend is a geology study, and her roomate is actually an oceanographic environment one. They were a lot of help in this project, and invaluable in providing me areas to search and study for this topic. They've also been instrumental in showing me that the environment is, without doubt, one of the least understood areas of knowledge that we have (short of the universe as a whole, I'd call it THE least understood).

[Match Strike]

I'm not trying to say you did a bad job in your post megabyte, in fact it looks like you did a vey commendably, but to say the effects of pollution are not well researched is one thing, but that that the environment is a seriously huge externality associated with the use of fuel consumption is not something that is really debated among those who know much about it.

I somewhat agree with Realist, but I wouldn't necessarily saythey do more harm than good. It's hard to really say. they may do more harm than good to the environment if people who use them drive a lot more than they might otherwise because of the perceived environemental benefits of driving said hybrid, when of course there are no benefits, only a potential to reduce harm.

study I would like to see would be the econmoical advantagesof "alternative" transportation in various areas (alternative being anything other than private vehicles).

But I do understand that this thread is more about the relatively immdeiate financial costs/benefits to an individual.

[Realist]

I somewhat agree with Realist, but I wouldn't necessarily saythey do more harm than good. It's hard to really say. they may do more harm than good to the environment if people who use them drive a lot more than they might otherwise because of the perceived environemental benefits of driving said hybrid, when of course there are no benefits, only a potential to reduce harm.

I'm doing research at the moment on climate change and public policy responding to climate change in particular. The fact of the matter is that even if the US cut emissions by 50% in 5 years, all benefits are more than eaten up by new development in China and similar developing nations. "Live green" idealism allows people to feel like they are doing something without actually doing something that can help. Which is why I tend to be very pessimistic about the future.

[Match Strike]

On the other hand, it would be even worse if we didn't do anything.

[Realist]

On the other hand, it would be even worse if we didn't do anything.

A month more before the earth burns. :cool:

[Match Strike]

A month more before the earth burns. :cool:

Mmm... we use up a lot of energy here, y'know.


Not to mention we're in a better position to try and convince China to reduce emissions (or scale back growth) if we make serious efforts here.


I agree, the shit is going to hit the fan, but we may at least have some efect on just how much shit and how fast the fan spins.


But this probably isn't the thread to be talking about this anyways.

[Realist]

Mmm... we use up a lot of energy here, y'know.


Not to mention we're in a better position to try and convince China to reduce emissions (or scale back growth) if we make serious efforts here.

95% as much pollution per polluter...10x as many polluters...the math doesn't look good even if they follow our footsteps. :)

But you're right. Maybe we should start a new thread.

[Megabyte]

Maybe we should start a new thread.

I've got another rant topic coming, gimme a bit and see if it blows up or over.

[Mordecai]

wait, what happens if I'm too lazy to read it all?

[Megabyte]

wait, what happens if I'm too lazy to read it all?

I mock you for being lazy, and probably not smart enough to understand it, then add you to my ignore list.

[Mordecai]

I mock you for being lazy, and probably not smart enough to understand it, then add you to my ignore list.

K, thanks for clearing that up