Auto sales, the price of gas and HELOC financing

This story says that one reason auto sales are down is one out of nine new cars sold recently were financed through HELOCs. As I've mentioned before, I think this is a larger factor in the move away from large cars than the price of gas (though both are factors). People are uncertain about the economy, many are unable to get credit at all or at favorable terms, and prices of everything are going up. High gas prices are part of it, no question, but don't think that we would see the current declines in VMT and large car sales without exogenous factors to the marginal cost of driving.

High gas prices and consumer demand

There have been many articles recently about how high gas prices are changing consumer behavior. Some articles note that in some areas gasoline consumption is down (as is the case in California), others note the decline in Vehicle Miles Traveled from last year. Still others claim that everyone is rushing to trade in large cars for small cars and hybrids, a claim that is partially true at best.

Getting back to the VMT claims, there are a couple of things to think about. The first thing is what activities are not happening because of the decline in VMT? Even though transit agencies are claiming up to about a 10% rise in transit boardings, that is still less that 0.5% of all trips (I don't have the details to break down VMT and trips, but unless it is long distance commuters who gave up driving there still should be noticeably less activities.). Commuting has inelastic demand, so the reductions must be in discretionary travel, yet retail sales were stable (not to mention all those people driving their SUVs from dealer to dealer to buy hybrids!). There is some anecdotal support to the idea that people are substituting cheaper goods for what they used to buy, but is that the case with driving? Could it be that people are buying the same amount of stuff except that it is cheaper and closer to home? That seems unlikely.

At this point with expensive but not outlandishly pricey gas the news report cannot be reconciled. If people are buying hybrids in droves they should be reducing their driving (their miles traveled is actually expected to increase as the per mile costs decline). No one has looked at the supply of hybrids, which have had waiting lists for a while now. Production may have just caught up to demand. Since transit is experiencing a surge in ridership, you'd hope the agencies would do something to maintain the ridership. That seems like a lost cause, at least in LA. As D.J. Waldie describes, transit service is getting worse in LA partly because of the interest in express buses and certainly because of trains. The most recent budget proposal from MTA allocates 23% of the total $3 billion budget to trains, which have a handful of lines compared with the hundreds of bus lines. About 14% of the budget goes to roads and bridges. With this type of investment no one will find the LA transit service worth continuing to take once they get used to high gas prices or finally buy that Prius.

Ultimately, however, travel is considered a derived demand. When the demand for travel declines lower demand should be seen elsewhere. Right now I can't reconcile the data available. I suspect every story has some truth, but the actual evidence will still have to be figured out.

Is DARPA the best predictor of future technologies?

The New Scientist has a story on the successes and failures of DARPA projects over the past fifty years. Technologies such as the internet and GPS stand out as commercial successes, and there are other successful endeavors that have less commercial applications. I think we are all better off without telepathic spies as the regular spies are having a hard enough time with conventional intelligence gathering.

Maybe if DARPA had worked on flying cars we would have them by now rather than only reading about the paleofuture. Hopefully the automated cars the DARPA encourages through their annual road race will lead to more commercially successful technologies. It seems that this type of public investment (or encouragement of private investment through award incentives) in innovative technologies does have some efficiency benefits compared to private investment. The efficiency gains are likely located in the institutionalized protocol standards and shortened time to deployment for network technologies.

In any event, hopefully we will soon have automated cars, which will leave more time for scaling walls in our news Z suits.

Women workforce participation varies across cities

A recent paper by researchers at the St. Louis Federal Reserve looks at variations is workforce participation by women across cities. The authors suggest that commuting time is correlated with women's participation in the work force. As commute times increase in metro areas, women's work force participation slows. The metro areas with the highest commute times have the lowest rates for women workers. So why is this?

The first explanation probably starts in the home. As the authors were looking at married women's workforce participation, there are likely children involved. Unlike single mothers, married mothers have a higher likelihood of being able to stay at home. Since commute times are a direct cost (though through time, not out of pocket) of working, higher travel times reduces the incentive to work relative to the cost of caring for a child (or children).

The second reason builds on women's obligations at home. There are two potential explanations for longer commute times. Either distances are greater or speeds are lower. Either of these possibilities leads to the idea that as times increase the predictability of the journey decreases. Unpredictable travel times make it hard to deal with day care, after school activities and other home obligations. This reason also increases the costs of working for women.

There are more possible explanations that explain the differences. I do wonder what the intraregional differences are. Controlling for communities within a metro area, will the results hold? There are variations in travel times in all urban areas. This points to the limitations of the data used (PUMS). It would be interesting to see this analysis done on a micro scale.

Transit pays higher gas prices, too

With all the talk about drivers leaving their cars at home and switching to transit due to high gas prices, one thing that is left out of the conversation is that transit agencies have to pay more for gas, too. This story from the StarTribune raises the point.

If transit fares rise, the benefits of leaving your car at home will diminish. Hopefully this will not be the case, but if the ridership increases are real this is a perfect opportunity to examine if transit suffers from too few riders or too little subsidy. If it's too few riders, then the excess capacity should be taken up by new users and the overall operation will become more efficient. If more riders and their fares show up and there is still not enough money, then perhaps the subsidy is inadequate. If the agencies are just using the excuse of more riders as a reason to ask for more money without efficiency or mobility gains, then maybe it's time to rethink how we operate transit.

Was the gas tax a good issue in Indiana?

A lot has been written about the proposed "gas tax holiday" from two leading presidential candidates. Many people claim that while bad policy, the issue is good politically. I see it differently. I wonder if the folks of Indiana were less likely to support suspending the gas tax than elsewhere because the state recently leased a major freeway to a private consortium. I think that the toll road issue probably raised the overall level of interest and awareness of transportation finance. I doubt there is a strong connection here, but perhaps some.

I also wonder how the gas tax issue is viewed in Minnesota, where the 35W bridge collapse last summer highlighted our weak infrastructure investment and the need for whatever gas tax revenue is available. I bet more people than are generally given credit are aware of these connections between tax revenues, investment and privatization.

I told you the people aren't dumb

A few days ago I suggested that pushing for the gas tax holiday was bad policy and bad politics because the people aren't dumb. After reading many things that say the gas tax issue polled well, I wondered where the authors got their information. After all, no one ever linked to a story that suggested as such. Turns out the NY Times actually asked people, and a majority of people think it's a bad idea.

This goes to show that conventional wisdom cannot be assumed. Of course people want to pay less for things than more, all else equal. But it doesn't take an economist to know that people are also willing to pay for things they value.

Clinton's gas tax stance does matter

Paul Krugman is wrong in thinking that the gas tax pandering doesn't matter. Apparently Clinton will introduce a bill aimed to create a gas tax holiday. This is bad policy and bad politics, but to introduce a bill seems to be a punch drunk thing to do. More importantly, regardless of the political intent of the bill and it's chances of passing, putting forth legislation like this suggests a disdain for the process of governing. Worse, it suggests that horse trading for terrible legislation is likely to be standard operating procedure for a Clinton administration. This is not an example of good governance.

The big car era is not over

There are many news stories today about how Americans are "flocking" to small cars when they purchase new automobiles. The stories invariably feature someone quoted as saying something along the lines of "the big car era is over." George Pipas from Ford says it's the most dramatic shift he's seen in his 31 years at the company. Perhaps if he had been there 35 years he would remember things differently.

There are many instances in automotive history where the big car era has been declared dead. Perhaps the first was in the late 1950s, where Volkswagen threatened tailfins and chrome with the Bug. American automakers responded with smaller cars and streamlined styling, because the excess of the previous era was "over." At least until the horsepower wars of the late 1960s and early 1970s, when the average fuel economy was under 12 mpg. Then two things happened that are interrelated. First, the oil shock of 1973 sent the price of gas skyward. But this can't be viewed as the only cause of a shift towards more fuel efficient cars. The second event that happened, and which may have had a larger impact on engine size, was the switch from leaded to unleaded gas and the addition of catalytic converters. CCs reduced fuel economy and power but produced much cleaner air. Unleaded gas also was generally of lower performance than leaded gas, too. I suspect that the clean air regulations provided cover for the automakers to reduce their engine sizes. Had they not been required to pollute less I doubt that engines would have gotten smaller. Car sales definitely declined during this era. This is the era that Mr. Pipas is not remembering.

There are other periods where the big car era has been declared over, but to return to today's news, there are many reasons to be skeptical of a profound shift in the desires of Americans when it comes to buying cars.

First, the SUV has been in a sales decline for a while. Crossovers, which are smaller and car based, have been where the new investment has been going. For instance, the Honda CR-V had sales that are essentially flat.

Second, the trucks that saw the biggest decline are often work trucks. As the construction sector has been losing jobs and/or future employment has become less certain, you'd expect sales of work trucks to decline.

Third, and directly related to the second item, is that the collapse of the credit market means that a lot of people who have been buying expensive (and large) cars from home equity or with cheap credit are not buying any more cars. There may even be a flood of slightly used cars on the market as people shed expenses and try to avoid losing their credit or homes.

Lastly, the cars with the highest sales gains are new models or updated ones. The Honda Fit, Ford Focus and Toyota Yaris are new products, and new products always tend to sell better because they have more promotional resources. That's why it's unfair to compare sales of the trendy Toyota Prius to the long-in-the-tooth Ford Explorer, which is at the end of it's product life cycle.

Small cars are still only about 20% of the market. The sales gains currently reported don't necessarily mean that people are "flocking" to small cars, and they certainly don't mean the era of the big car is over. The next cycle will see even bigger cars, but hopefully we will have better propulsion options for them.

Fly slower and save fuel

Airlines are trying slower flight speeds to save fuel. Some of the savings are dramatic. The slower speeds increase the time in air, but because of the unpredictability of air travel times anyway I doubt that any passenger will notice. This seems like a good idea overall, though it won't have any positive effects on air pollution.

The purpose of a subway map

What should a subway map tell us? The old NYC abstract map is being updated for a magazine. It was criticized for being to uninformative, though the London Tube map is generally praised for it's simplicity.
As we learn more about how people navigate their cities, whether by nodes, destinations, landmarks or street signs, we might gain more insight as to what a map should include. It seems that with fixed and infrequent stations-like a subway-a simple map is a nice compliment to a more detailed map that becomes redundant as locals gain knowledge of their city.