Fuel-efficient cars and the ghost of Thorstein Veblen

Best known for his work on conspicuous consumption, Dr. Veblen (1857-1929) was also interested in economic anomalies such as one named after him, the Veblen Good.  A commodity is a Veblen good if people's preference for buying it increases as a direct function of its price -- contrary to all standard economic theory, which says we'd typically like more of something to the extent it costs less.  But in the case of high-efficiency (high MPG) cars, such as those the Automotive X Prize seeks to encourage, the Veblen effect may apply.  Why is this?  Well, as researchers at the UC Davis Institute of Transportation Studies and elsewhere point out, until roughly today if one wanted a more fuel-efficient car one spent less money.  Fuel-sippers of recent years have almost always been small, inexpensive, and typically stripped of luxury features.  Think Geo Metro, Toyota Echo, VW Fox.  Thus, in the public mind, efficiency became associated with "cheap," or tinny, or small, or worse.  Only now, with the advent of Prius, Hybrid Escape, Civic Hybrid, and new-generation VW and Mercedes diesels, etc., does the public have the option to pay more, for a well-equipped and/or spacious but still efficient vehicle.  Of course all of us want to see the cost of fuel-saving technologies come down, in order to make them more widely available.  But in the near term, it is crucial for the industry to keep launching these "upscale efficient" vehicles, as it gives the market more choices.  Hard-core fuel savers can still scour eBayMotors for an old Golf diesel, or buyers uninterested in interior space can pick up an Aerio -- but for the vast middle of the market pricier and more feature-laden cars may actually sell better.  And as these cars penetrate the market, any residual stigma against green cars as cheap or tinny erodes... and that's good for all of us.

Comments

[Ken Fry]

I find that I have to agree with you, Glenn, but I find the prospect of people buying heavier, feature-laden hybrids a very discouraging one. Already, there are hybrids that are very nearly gas guzzlers. The Accord hybrid, for example, has EPA estimates that are about the same as the 4 cylinder Accord. (Yes, it accelerates faster, but my four cylinder Accord accelerates just fine and has a top speed limited to 130 -- far faster than I would ever need to go.) Because the EPA numbers do not apply well to hybrids, actual overall mileage obtained with the hybrid Accord is lower than that for the four-cylinder Accord. (The hybrid does a little better in heavy, stop-and-go, traffic, of course. But under those conditions you are using tenth of the available horsepower.) So the Accord hybrid plays directly into the “bigger and faster is better” mindset, from which we already suffer so badly. Likewise the Toyota Highlander and Lexus Rx 400 hybrids.

The Ford Escape hybrid gets obscenely poor fuel mileage in comparison to a Prius, which offers comparable interior space and the promise of far better reliability. Even the EPA estimates for the Escape are only slightly better than those for my four cylinder Accord. But in practice, people are getting mid 20's fuel efficiency from the Escape, which is worse than I get from my Accord. The Accord is on a five inch longer wheelbase, has more passenger space, handles and rides better, and -- get this -- tows three times as much! So the supposed utility features of an SUV are lacking in the Escape. It is a small, inefficient package that was not purpose-built as a hybrid, nor was it purpose-built to be fuel efficient. Amazingly, this atrocity costs just a few dollars less than double what I paid for my 2004 Accord (which was $15,300, including its optional air conditioning).

The Insight and second-generation Prius are inspired designs, and both get really excellent mileage (by today's admittedly low standards). Both are engineered in every single aspect, top to bottom, stem to stern, to provide very high efficiency. The Lexus, the Escape, the Highlander, and the Hybrid Accord are thrown together as cynical attempts to sell the same-old-same-old, under the guise of efficiency and environmentalism. It is not possible to get high efficiency from large, heavy, high-powered, and aerodynamically poor vehicles, laden with features that use more electricity, and therefore more fuel. To extend the argument, suppose there were a hybrid Hummer offering an incredible 15 or maybe even 18 miles per gallon. Would that Hummer (wildly efficient by Hummer standards) then represent part of the solution, or part of the problem?

More discouraging news: A 2004 Jetta TDI was a very nice car, with excellent handling, good acceleration, and wonderful ergonomics. The enthusiast magazines had great things to say about it – it was anything but tinny and stripped down. It was rated at 51 mpg on the highway, if I remember correctly. The 2007 model is rated at 42 mpg. It’s a little plusher, a little quieter, but much less efficient. Is that part of the solution or part of the problem?

More discouraging yet: proof of Veblen’s theory already exists in this market. The Escape hybrid gets the best fuel economy of the Escape/Highlander/Lexus Rx group (which doesn’t say much for the others). It also costs the least. But there have been 47,000 of the Highlanders and Lexus sold, and just 15,000 Escapes. The gas guzzlers are winning. I hope the X Prize can change that.