The MPG Illusion

A friend called my attention to a teaching award given by the Social Psychology Network to Richard Larrick of Duke University for a class demonstration based on his and Jack Soll's 2008 Science paper, “The MPG Illusion.” The exercise “offers an example of how psychology can be used to address climate change.” Before reading any further, please take this one-item quiz.

If you're like most people, you gave the wrong answer because we mistakenly assume that a vehicle's fuel consumption is a negative linear function of miles per gallon. That is, we assume that you save the same amount of energy when you go from a car that gets 10 MPG to one that gets 20 MPG as you do when you upgrade from 40 MPG to 50 MPG. To see why that's wrong, please watch this video.

One way of summarizing Larrick and Soll's point is that switching to a more fuel efficient car has diminishing returns on the amount of energy (and money) saved. Therefore, when government increases the CAFE (Corporate Average Fuel Efficiency) standards required of auto companies, that also has diminishing returns. This is illustrated in the table below, and in the graph, both of which chart gallons per 10,000 miles as a function of miles per gallon.

Miles per Gallon	Gallons per 10,000 Miles
10	1000
11	900
12.5	800
14	700
16.5	600
20	500
25	400
33	300
50	200

It follows that gallons per miles is a more meaningful measure of fuel efficiency than miles per gallon. When Cass Sunstein served as administrator of the Office of Regulatory Affairs during President Obama's first term, he was able to get gallons per 100 miles added to the fuel economy sticker on new cars beginning in 2013. Unfortunately, as you can see, it's in smaller print than miles per gallon.

Larrick does not say what effect he expects his demonstration to have on its audience. In discussing this with my friend, we realized that there are two ways students might respond to these data.

1. Switching from a fuel inefficient vehicle to one that's slightly less inefficient vehicle—say, from 10 to 15 MPG—saves more energy than most of us thought. People should be strongly encouraged to upgrade their gas guzzlers, even if they don't upgrade them very much.

2. But switching from a fuel efficient car to one that's even more fuel efficient has less effect on your pocketbook and the planet than most of us thought.

The danger is that students will draw the second conclusion rather than the first. In fact, conservative commentators have referred to the Larrick-Soll paper when criticizing government attempts to encourage greater fuel efficiency.

Buying a highly fuel efficient vehicle may not make financial sense for the individual. If you're choosing between a Toyota that gets 40 MPG and a Honda that gets 50 MPG, you save 50 gallons every 10,000 miles with the Honda. If the useful life of the car is 100,000 miles, and if gasoline costs $4/gallon, you save $2000. The Honda is not likely to pay for itself on the basis of gas mileage alone. If you buy it, you're doing it for the planet rather than yourself.

But any improvement in fuel mileage is important for society. If you multiply the 500 gallons saved by the Honda by the number of vehicles in the US fleet, that has a substantial effect on the amount of CO₂ in the atmosphere. In the long run, this benefits us all, whether we buy a fuel efficient car or not. Some of you may recognize this as an example of the commons dilemma, in which one choice is better for the individual in the short run, but the other choice is better for everyone in the long run. One way of getting people to do the right thing in a commons dilemma is through a government intervention such as the CAFE standards.

You may also be interested in reading:

ALEC:  There Goes the Sun

Public Getting Warmer