Study: Rising Gas Prices Don’t Impact Consumption

A new study suggests that increases in the price of gasoline have very little impact on consumer behavior. If that's true, it has serious implications for energy policy.

According to a new study, increases in the price of gas actually have very little impact on consumption:

According to research by UC Davis’s Jonathan Hughes, Christopher Knittel and Daniel Sperling, [PDF] Americans are now less responsive to increases in gas prices. In the late 1970s, a ten percent rise in the cost of gas would lead to about a three percent decline in the amount of gas consumed. In the early 2000s, on the other hand, gas prices would have to rise about 60 percent to provoke a similar decline in gas consumption. The researchers theorized that this might be because spending on gas is now a smaller fraction of total monthly income or because cars get better mileage now, meaning that cutting back on driving saves less gas than it would have in the 1970s. But either way, their research suggests that even if gas prices go higher, we’re unlikely to see Americans buying less gas.

One possible explanation for the change in consumer behavior is the simple fact that, for many people, driving is quite simply a necessity. For the average suburban resident, for example, public transportation simple isn’t a viable option for the daily work commute. Even if it is, it’s typically the case that you have to drive somewhere to access the public transportation. The same goes for families where children are involved in a multitude of after-school or summertime activities; someone needs to drive the kids where they need to be. When you don’t really have a choice about driving, your reaction to an increase in the price of gas is likely to be a shrug of quiet acceptance. After all, what else can you do?

Another factor that may be influencing consumer behavior here is the fact that way we pay for gas has changed since the 1970s. Back then, most people paid cash when they filled up at the pump. Today, it’s typically a matter of swiping a credit card and filling up your car (except in New Jersey, of course, where people still aren’t allowed to pump their own. We’ve already seen plenty of evidence over the years that credit cards cause people to spend more than they would if they used cash so it w0uldn’t be surprising to see this happening at the pump as well.

The policy implications of this study should seem obvious. Energy economists, and many on the left, have long advocated increasing gasoline taxes as a method of encouraging people to reduce consumption of gasoline. If these findings that increased gas prices don’t tend to impact consumption are correct, then that puts the idea of raising gas taxes to reduce consumption into serious doubt

Matthew Yglesias brings up the other issue that this study  raises:

Since households are income constrained, that means the impact on spending on everything that’s not gasoline will be relatively large.

That, quite obviously, will have an impact on economic growth. So, the implication is that increasing gas taxes would do very little to reduce consumption and could end up hampering economic growth. The worst of all possible worlds.

 

FILED UNDER: Economics and Business, Taxes, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. john personna says:

    The comparison to the 70’s gives the study a skew.

    At that start of the 70’s many people were driving thirsty V-8 sedans. By the end of the 70’s most cost-sensitive buyers had done the down-size to efficient Japanese cars. You remember, it was so bad that the Japanese had to do voluntary restraints, to slow the change.

    Now in the 00’s and 10’s we hit higher gas prices with most cost-sensitive buyers already in higher mileage cars. They can’t make that switch again.

    Well, they can switch to hybrids, though at higher cost than the 70’s transition (Honda Civics and Toyota Corollas were both cheaper and more efficient than the cars they displaced).

    And sure enough, every time gas prices spike so do sales of hybrids.

  2. john personna says:

    BTW, the worst thing in the world to be is a cost-sensitive buyer who for whatever reason bought a big SUV. They’ll switch when they can, but if they’ve got a 5-6 year car loan, it may take time.

  3. Ernieyeball says:

    “…researchers theorized that this might be because spending on gas is now a smaller fraction of total monthly income…”

    In 1973 I ran a full service gas station. I pumped your gas for 39.9 cents/gal. No self serve in Illinois at that time. My pay was $1.05/hr. At those numbers it took me 23 minutes to earn the money to pay for a gallon of regular leaded gas for myself.
    In 2008 when gas was $4.499/gal. I was earning $17.00/hr. That works out to about 16 minutes to earn the cash to pay for a gallon of unleaded regular self serv.
    So was gas “cheaper” at $4.499/gal. in 2008 than it was in 1973?
    Today gas is $3.699/gal. and I am out of work drawing unemployment benefits.
    I’m thinking about taking the bus.

  4. EJ says:

    we’ve know this for a very long time. The price elasticity of demand for gasoline is very innelatsic, particuarly in the short run. This is exactly one of the points that keeps getting missed in all these cap and trade debates. So we put in a regime – now what? What should the market price be? How high of a price on carbon fuels do you think needs to exists for emissions to actually be cut substantially?

    If an over trippleing of oil prices over the last decade has caused US emissions to just stay flat (emmissions per dollar of GDP have fallen at about the same rate as total growth), then actually cutting emissions will require a much higher market price and/or slower economic growth.

    So for everyone who is a big supporter of cap and trade, stop complaining about high gas prices. This is what you want – even if you don’t realize it.

  5. EJ says:

    fossil fuel use is not going to signifigantly fall until some technology emerges as a viable alternative. We arent there yet.

  6. Trumwill says:

    Driving may be a necessity, but how far you drive and in what sort of vehicle is much, much more variable.

    To some extent, I think that we would need a long, sustained increase in order to see the effects. People don’t buy cars every year. They don’t buy houses every year or every five. If you’re driving an operational vehicle, gas prices have to go up enormously for you to consider buying a new car simply to save money at the gas pump. Ditto if you own a home (and especially in the current market). In the longer term, though, these sorts of things do make a difference. When I was looking around for a car when I had an 80mi round-trip commute, I was looking very keenly at mileage. However, now that we’ve moved somewhere that my mileage has plummeted, I bought something with rather poor mileage due to other considerations. This is all further complicated by the fact that gas prices go up and gas prices go down and you never really know whether they will go up, stay up, or go down. On the other hand, if you knew for a fact that gasoline was going to be $1 more expensive per gallon every two years for the next six years, and that this change would be permanent, it would more likely factor into future decisions.

    On the other hand, the elasticity is certainly limited, even over the longer term. And a lot of people just don’t think things through. The notion that getting a house another ten miles out of town is going to cost you another $3 a day, every day, doesn’t register even if such people would scoff at paying $3 in tolls. So in that sense, maybe it would make more sense to hit people at the purchasing stage. Taxing low-mile vehicles and using that to subsidize vehicles with better mileage (and perhaps public transportation).

  7. just me says:

    I think the reason is mostly that people have to drive and they cut things out of the budget elsewhere.

    There are times when I may not choose to drive some places, but most of my driving is still the have to sort.

  8. john personna says:

    So for everyone who is a big supporter of cap and trade, stop complaining about high gas prices. This is what you want – even if you don’t realize it.

    Cap and trade is a scam. It’s a way of hiding a do-nothing agenda.

    I am in favor of an increased gas tax. I think that naturally higher prices are a poor second to that, mainly because they do nothing to reduce the deficit. Better to skim a more from what will surely be higher prices, before they all go to Saudi or Iran.

    fossil fuel use is not going to signifigantly fall until some technology emerges as a viable alternative. We arent there yet.

    It’s actually easy to halve fuel consumption, as another one-time deal. That’s the typical car to hybrid jump.

    You are right that gas consumption is short-term inelastic, but there are tipping points. Again, that’s what we had in the 70’s.

  9. john personna says:

    It’s interesting to note that I am at a decision point. I’m considering a 4×4 as a second vehicle, to supplement the Prius.

    The Prius is great for what it is, but I have kind of pushed the limit on gravel roads. Had to back down a hill a couple days ago ;-/

    It will be interesting to see what fuel price makes me change my mind …. at $4 I could keep an Xterra … it would still be affordable recreation. Ye gods, it’s not like those poor guys in mega motorhomes, pulling a Jeep. They’re still out there.

  10. Nonsense. Rising prices definitely affect consumption, just not necessarily immediately in this case. Just because gas prices rise two dollars a gallon tonight, I can’t not drive to work tomorrow. On the other hand, if beef rises two dollars a pound tonight, perhaps I’ll eat chicken or have a meat free day. In the long run run higher gas prices will result in smaller cars, fewer trips to grandmas, car pooling, more people forced into public transportation, etc. But changing a lifestyle built on a specific quantity and mode of transportation isn’t as simple as only eating out once a week instead of twice. We can argue about thee items as societal goals, but that’s entirely different than claiming that gasoline somehow does not obey the economic laws of supply and demand.

    This is the same kind of logic that distorts the CPI.

  11. Trumwill says:

    It’s actually easy to halve fuel consumption, as another one-time deal. That’s the typical car to hybrid jump.

    It’s possible, particularly if you’re looking at the Prius, though not on an apples-to-apples jump (Camry to Camry Hybrid, Civic to Civic Hybrid, etc). And depending on how much freeway driving you do.

  12. john personna says:

    The Prius has very nearly the same passenger plus cargo volume as the Camry. So I guess you choose passenger or cargo space.

    Prius: passenger: 93.7 cu ft + cargo: 21.6 cu ft = total: 115.3 cu ft

    Camry: passenger: 101.4 cu ft + cargo: 15.0 cu ft = total: 116.4 cu ft

    I feel like I have loads of room with the Prius interior, and if anything feel cramped with cargo. So I guess I made the right move.

  13. Steve Verdon says:

    Since households are income constrained, that means the impact on spending on everything that’s not gasoline will be relatively large.

    My God! Stop press Matthew Yglesias has just discoverd something amazing we should call it…the substitution effect. Yeah…oh wait.

    And relatively large? WTF does that mean? How about relatively larger than previously thought or relatively larger than in the late 70’s/early 80’s?

    So for everyone who is a big supporter of cap and trade, stop complaining about high gas prices. This is what you want – even if you don’t realize it.

    Shush you! Bring up that kind of stuff.

    To some extent, I think that we would need a long, sustained increase in order to see the effects. People don’t buy cars every year.

    Has the rate at which people buy cars dropped recently or over time? I don’t see the point of this comment.

    Driving may be a necessity, but how far you drive and in what sort of vehicle is much, much more variable.

    Not according to this study. That would be incorporated in the analysis. The amount of gas you buy is a function of the distance you travel. So the implication is that either people:

    1. Have less fuel efficient cars than in the late 70’s/early 80’s.
    2. Are less sensitive to gas prices in terms of consumption and in turn how far they drive.

    It’s actually easy to halve fuel consumption, as another one-time deal. That’s the typical car to hybrid jump.

    Jevon’s paradox says it might not be so easy. To make that kind of jump that also reduces consumption you’ll need a tax to go right along with it.

    You are right that gas consumption is short-term inelastic, but there are tipping points. Again, that’s what we had in the 70′s.

    I don’t think it is a tipping point as it is likely other factors that are involved. For example, has urban and suburban development changes so that non-discretionary driving has increased? Is it a type of variation on the Jevon’s paradox that over all improvements to fuel efficiency has resulted in less sensitivity to fuel prices?

    Nonsense. Rising prices definitely affect consumption, just not necessarily immediately in this case. Just because gas prices rise two dollars a gallon tonight, I can’t not drive to work tomorrow.

    So you are suggesting that the research is fundamentally flawed and that the elasticity during the earlier period was calculated over a longer time period than the more recent estimate? I hate to break it to you, but that is not the case.

  14. PD Shaw says:

    I think the other difference is the lack of continuity in the price increases. See this graph. We’ve had vast fluctuations that don’t appear to give clear directions to the consumer on the longer-term direction on prices. It’s $2.25 one year; a couple years later it’s $4.40, and then the next year it’s $1.60.

    (One difference with the 70s is that the Sauds have been so far unwilling to repeat their mistakes)

  15. john personna says:

    I think the way to understand it is as separate market segments, moving independently.

    Look at us hybrid owners. Gas prices have gone up a lot since I bought my car in ’05. Why haven’t I further reduced my consumption?

    1) I already did.

    2) How, exactly?

    It is a sad fact that (unless you believe in the Volt) there is no car I can buy that will get me further mileage improvement. Maybe if VW does actually introduce that 260 MPG thing

    (It would kind of hurt at the pump to use an Xterra for road trips, but the total impact on trip costs is low. This is especially true if I can get away from Prius hotels to backwoods camps.)

  16. Trumwill says:

    Has the rate at which people buy cars dropped recently or over time? I don’t see the point of this comment.

    No, but if we’re looking at 5-year windows, which the study is, you’re dealing with a lot of people that have been driving the same car throughout that period.

    Not according to this study. That would be incorporated in the analysis.

    Again, the study is looking at a 5-year period. There are reasons to believe that the changes involved, people moving and swapping cars, might involve a longer time period. Not only for people buying cars within that window, but doing so aware that gas prices are high and are going to stay that way for a long time and that this isn’t just a fluctuation. Or maybe not, as I said in my last paragraph.

    Jevon’s paradox says it might not be so easy. To make that kind of jump that also reduces consumption you’ll need a tax to go right along with it.

    True, though if Jevon’s Paradox is in effect, then presumably demand is indeed elastic and higher gas prices would indeed reduce consumption.

    So you are suggesting that the research is fundamentally flawed and that the elasticity during the earlier period was calculated over a longer time period than the more recent estimate?

    I’m not Charles, but answering for myself, the research regarding short-run elasticity does not appear to be flawed. However, it does not naturally follow – as Doug suggests – that “prices don’t impact consumption.” The study indicates that they do, in fact, impact consumption (just not as much as previously). And, of course, elasticity for something like fuel consumption – based on longer-term purchases such as housing, jobs, and car purchases.

  17. Trumwill says:

    I think the other difference is the lack of continuity in the price increases. See this graph. We’ve had vast fluctuations that don’t appear to give clear directions to the consumer on the longer-term direction on prices. It’s $2.25 one year; a couple years later it’s $4.40, and then the next year it’s $1.60.

    This is very true. The authors of the study actually note that the ’75-80 time period studied had “longer periods of elevated price”, so the people had more time to adjust, and that the overall volatility of prices in the ’01-06 time period may have lead people to conclude that the price increases were temporary.

  18. john personna says:

    Is the research fundamentally flawed? I’d say it can be correct (internally consistent) without being terribly useful.

    BTW, Jevon’s Paradox is not a natural law. It is just a conjecture about what can happen in some situations, all else being equal.

    I don’t think it’s actually in-play right now. World gasoline consumption is not expanding because existing drivers are doubling down with hybrids. World gasoline consumption is expanding because emerging markets are going car crazy (and even buying SUVs).

  19. Trumwill says:

    Is the research fundamentally flawed? I’d say it can be correct (internally consistent) without being terribly useful.

    It can also be useful and correct, but ultimately not fully demonstrate what Doug thinks it demonstrates.

  20. john personna says:

    Useful? From the article:

    The econometric models used in this paper reflect previous studies of gasoline demand. Our base model specifies the log of gasoline consumption as a function of the log of price and income. Specifically, we estimate:

    lnG = β + β lnln + YP β + ε + ε

    where Gjt is per capita gasoline consumption in gallons in month j and year t, Pjt
    is the real retail price of gasoline in month j and year t, Yjt is real per capita disposable income in month j and year t, εj represents unobserved demand factors that vary at the month level and εjt is a mean zero error term. Both Yjt and Pjt are in constant 2000 dollars. We model the εj ’s as fixed month effects to capture the seasonality present in gasoline consumption.

  21. john personna says:

    I meant to preview that and add.

    Anyway, it’s the worst form of economics. It’s physic envy.

  22. PD Shaw says:

    The authors of the study actually note that the ’75-80 time period studied had “longer periods of elevated price”, so the people had more time to adjust, and that the overall volatility of prices in the ’01-06 time period may have lead people to conclude that the price increases were temporary.

    Thanks, Trumwell. The time horizon for decisionmaking and the perception about future prices appear to me to a big issue. If the government set forth a policy that imposed relatively predictable tax increases on gasoline, one would think the outcome would be greatly different.

  23. matt says:

    It’s actually easy to halve fuel consumption, as another one-time deal. That’s the typical car to hybrid jump.

    That depends greatly on the car the person is jumping from. My del sol gets upwards of 40 MPG on freeways with two people and a moderate amount of baggage (averaging usually around 38-40 MPG). So I wouldn’t see much of a jump in mileage…

  24. john personna says:

    Good choice on the del sol, matt … but FWIW I note the “on freeways” 😉

    I had a hard time hitting anything like EPA “mixed” ratings in my own mixed driving, until I got the Prius. Pretty much 48-50 MPG no matter what I’m doing. Now and then I rock a 65, but that’s only coming down from the high desert to the coast or something.

  25. JKB says:

    Don’t worry, people will cut back on gas usage. See higher oil prices lead to higher food prices, which lead to lower employment. Unemployed people can’t cut back on non-food/fuel expenditures to compensate plus they have no job to go to.

    We also are very close to the recession tipping point ($120) in oil prices (Brent @$114).

    We’ll also see the rest of the oil intensive industries, make the final move to more business friendly climes.

  26. Dave Schuler says:

    I think it’s a bit like the old story about putting a frog in a pot of water on the stove. If prices rise slowly, people just pay more. If prices rise fast enough, people consume less.

    IIRC oil economist James Hamilton wrote a post on this very subject a couple of years back (when prices last rose sharply). Contrary to the prevailing wisdom (that consumption was inelastic) people used less gas.

  27. Trumwill says:

    If prices rise fast enough, people consume less.

    Unless they think that the rise might be temporary, which is a result of volatile pricing. I actually think that people would respond more directly if the rise in gas prices were more linear. The markets don’t seem to work that way, the media (which has been saying “Is $5 gas right around the corner?” for over five years) is unreliable, and prices fluctuate with the seasons anyway.

  28. Trumwill says:

    If the government set forth a policy that imposed relatively predictable tax increases on gasoline, one would think the outcome would be greatly different.

    That’s kind of my thinking. I made a similar comment above before even seeing the mention in the study about the greater fluctuations in the second period than the first. When gas prices went up in ’05-06, there were concrete reasons for it (Katrita). I was commuting 110 miles each way every day. I wouldn’t have really factored in gas prices into my decisions simply because I didn’t know what gas prices would look like a year hence. Maybe the same could be said for the late 70’s (I wasn’t around then), but I would expect the effects of geopolitics to be more likely to endure than a natural disaster taking out some refineries.

  29. Wiley Stoner says:

    Where are all the communists? Reynolds? Mantis? anjin son? Ponce? Herb? How come nothing from the left is heard on this topic? Your guy got us here and his policy is this is where we belong or worse. Let us here from the left. Doug, I hate to see you quote anything from anyone in Davis, CA. There is something either in the air or water there. Nice town, but it is a prime expample of why academia should not be allowed to interbreed. These folks spent $500,000 to build a tunnel under the freeway to save some frogs or toads who were getting killed crossing the freeway. They have an ordinance which says no light can be used at night which can be seen from above. They are nearly as crazy as those in Bezerkly.

  30. Drew says:

    I’ll leave the economics in Steve V’s capable hands.

    This is scary:

    “Prius: passenger: 93.7 cu ft + cargo: 21.6 cu ft = total: 115.3 cu ft

    Camry: passenger: 101.4 cu ft + cargo: 15.0 cu ft = total: 116.4 cu ft”

    Be afraid. Very afraid.

  31. matt says:

    john personna :

    Thanks I bought it several years ago from a dude I know that rebuilds Hondas. Depending on my driving style I can get +30mpg pretty consistantly in town. That does require me to NOT drive like an idiot 🙁 So yeah I am a bit jelly at your 48-50 in town 🙁 But I guarantee I COULD SMOKE YOU SON OH SNAP!!!

    On a serious note I have issues fitting in cars and SUVs due to me being over 6 foot 🙁 If I have the top off the del sol I can sit the seat up straighten my back and look over the windshield while driving..

  32. just me says:

    Buying new cars is not so easily done on limited/fixed incomes. Rising gas prices hurt lower income people but they generally don’t have an easy way to make it better. They just suck it up, because they have to go to work and make cuts elsewhere.

    Also for a lot of people higher gas prices probably do often influence what type of vehicle they choose to buy when they are ready or need to buy, but buying a car with better gas mileage is expensive up front and a lot of people are better off sucking up the higher gas prices than sucking up higher gas prices and a much higher car payment.

  33. Trumwill says:

    Just Me: buying a car with better gas mileage is expensive up front and a lot of people are better off

    Only if you’re looking at hybrids, EVs, and/or specialty cars. Beyond that, mileage is typically a function of size as much as anything else. The smaller the car, the better the mileage. The smaller the car, the lower the price. I’ve historically driven high-mileage cars mostly because I am a cheap SOB.

    Matt: On a serious note I have issues fitting in cars and SUVs due to me being over 6 foot 🙁

    I’m 6’5″ and long in the trunk. The good news is that they’ve finally figured out how to make roomy economy cars. Up until recently I had an Escort, which i had to lean my seat back just to fit inside (and there was no way I could fit inside a caliber). Having sat recently in the Versa and Focus, it’s a completely different experience. I’m curious what kind of SUV you would have difficulty in, though. The new car is a crossover and I fit into it very easily.

  34. just me says:

    Trumwill cars expensive period. I assume if a family already has a payment looking for something in a similar range and trading would be okay, but I drive a car that is 16 years old because I can’t afford a car with payments and I am not looking for taking on the debt to save a few dollars at the gas pump-the trade off just isn’t there.

  35. john personna says:

    “I COULD SMOKE YOU SON OH SNAP!!!”

    😉

    Especially the way I drive these days.

  36. Steve Verdon says:

    John,

    Anyway, it’s the worst form of economics. It’s physic envy.

    You are completely wrong, it is a statistical model–i.e. and attempt to measure and quantify a useful economic concept. All statistical models look like that. If it was a statistical model on biology would you call it physics envy? How about biomed? What about sociology or political science? Are statisticians also people who suffer from physics envy?

    This is very true. The authors of the study actually note that the ’75-80 time period studied had “longer periods of elevated price”, so the people had more time to adjust, and that the overall volatility of prices in the ’01-06 time period may have lead people to conclude that the price increases were temporary.

    Now that is an interesting observation. Volatility could lead most people to think, “Meh, I’ll just ride it out not worth the hassle and possible increased expenditures to get a new vehicle.”

    Dave,

    Contrary to the prevailing wisdom (that consumption was inelastic) people used less gas.

    Sure, having inelastic demand and perfectly inelastic demand (i.e. a vertical demand curve) are two different things.

    PD,

    If the government set forth a policy that imposed relatively predictable tax increases on gasoline, one would think the outcome would be greatly different.

    Yes, that is something similar to Friedman’s permanent income hypothesis. A permanent change will have a different effect than a temporary change. A government policy that is seen as being permanent or having no known expiration date will produce a different response than one that has a fixed end date.

  37. john personna says:

    I don’t actually disagree with the paper’s actual conclusions:

    In this paper we estimate the average per capita demand for gasoline in the U.S. for the period from 1974 to 2006. We investigate two periods of similar gasoline price increases in order to compare the demand elasticities in the 1970s and 1980s with today. We find that the short-run price elasticity of U.S. gasoline demand is significantly more inelastic today than in previous decades. This result is robust and consistent across several empirical models and functional forms. The observed change provides evidence of a structural change in the U.S. market for transportation fuel and may reflect shifts in land-use, social or vehicle characteristics during the past several decades. Provided our results extend to long-run elasticities, these results suggest that technologies and policies for improving vehicle fuel economy may be increasingly important in reducing U.S. gasoline consumption.

    “shifts in land-use, social or vehicle characteristics” are what many of us have been talking about.

    The bit that I don’t like is encapsulated in “provided our results extend to long-run elasticities.”

    That is where econometrics is decidedly not like biology or physics. The harder the science the more you can take a short span as representative of the long term. The more “volition” enters in, the less your statistical models may be extended.

    Measuring short term price sensitivity is economics. Thinking that your short term price sensitivity outside the time range you just measured … physics envy.

  38. john personna says:

    Missed a few words:

    “Thinking that your short term price sensitivity [is valid] outside the time range you just measured … physics envy.”

  39. john personna says:

    Or, just to drill right down … Galileo measured the acceleration of gravity over a short ramp ~400 years ago. His measurement is still good. That’s physics.

  40. Taiko Drum says:

    Don’t consumers lease vehicles much more now than they did back in the 70’s and 80’s. I’ve never leased a vehicle, but I understand the penalties/obstacles of terminating a lease early can be pretty harsh. This may deter consumers, especially those most sensitive to gas price increases, from being able to react in a timely fashion to gas price fluctuations. They may just do the math and realize it’s cheaper to keep the “gas guzzler” than pay the penalties and get a car with better gas mileage.

  41. Steve Verdon says:

    Thinking that your short term price sensitivity [is valid] outside the time range you just measured … physics envy.

    Oh, so when you get slapped for being a completely ignorant jackass you change your definition.

    And nice job reaching. They note some interesting policy implications IF the extension of the short term to long term holds at the end of their paper and it is transmogrified into physics envy.

    Shorter John Persona: I got nothing….so I’ll quote some off topic finding by Galileo….

  42. john personna says:

    My two posts are self-consistent.

    And there is genuinely a difference between the kind of measurement you can do in physics, and be confident of for centuries, and the will-o-the-wisp economics of price sensitivity that cannot be extended with confidence at all.

  43. john personna says:

    Note: Those 1970’s tipping points represented something that was not, could not, be predicted from prior data.

    If someone had said in the 1960’s “IF the extension of the short term to long term holds” it would have been completely useless.

  44. Steve Verdon says:

    My two posts are self-consistent.

    Right, maybe if you post that a few more times people will believe it.

  45. john personna says:

    Sticking to the high ground, the problem with “extending” something like “price sensitivity” is that it reduces to this:

    “things will stay the same, unless they change.”

    We know that. It’s actually the odds of the “unless” part that we’d like to know. Is it likely, unlikely, an extreme event? There is no way to quantify it. Economics cannot answer. Tying back to LTCM, they thought they had a mathematical answer. It was their faith in economics as a mathematical science that led them astray.

  46. matt says:

    Trumwill : I barely fit in my friend’s explorer which is fairly new. Over 7 years ago I was installing a stereo system in a Jeep Cherokee and I could barely drive the thing due to a lack of internal height combined with the dark blue on the upper edge of the windshield. Generally I run into this issue when sitting in the vehicles of my friends and I’m not the most observant person so I cannot remember what model/makes they are. One of my friend’s had a SUV that was so bad that I had to slouch down AND turn my head to the side to fit but it was a fairly older model. Oddly enough the best car to fit me was a 91 CRX I had. Honda didn’t even bother putting in a backseat so there was TONS of adjustment range. It’s too bad from an accident perspective the car was pretty much a go-kart. Meanwhile my wife’s 2002 mustang convertible can barely fit me 🙁

    Especially the way I drive these days.

    teehee I’m getting that way myself. Considering the stupid I’ve done in my life I’m lucky to be alive..

  47. matt says:

    I would like to amend my post by adding that the BEST car for fitting me was my 72 nova which I loved dearly and miss till this day 🙁

  48. matt says:

    You probably won’t believe this but I was actually averaging 35 MPG in a 90 manual four door accord (no a/c) back when I was delivering pizzas +8 years ago. I used to watch my gas consumption like a hawk and I’ve always been a mechanical person so my car was always running in top condition with proper air in tires etc. It’s amazing how much of an effect a couple PSI can have on your mileage. So overall I guess we’re determined that your mileage may vary?

    I ran a giant OD on my Nova which allowed me to get 25 MPG highway lol..

  49. john personna says:

    My worst car for MPG was a Subaru WRX. It would get 27 MPG on the highway, if I was dedicated in the way you say. The problem was that it had this turbocharger … and I swear, you only had to put your foot in it once or twice to get MPG down to about 22.

    Heh, I guess it’s a good thing my Prius has no nitrous.

  50. matt says:

    Yeah I imagine with the turbo that car could get pretty damned thirsty. I ran a quadrajet on my nova so as long as I kept my foot out of it I was fine cause the primaries were tiny but the secondaries were gigantic.

  51. Steve Verdon says:

    Sticking to the high ground, the problem with “extending” something like “price sensitivity” is that it reduces to this:

    “things will stay the same, unless they change.”

    Right, sticking to the high ground now after repeatedly lying in another thread…but oh well.

    This is a completely untrue characterization of what the author’s said. Something you do alot these days John. Their claim was that IF their results hold (at least qualitatively) that the implications for policy in terms of reducing gasoline consumption are that considerably higher taxes than previously thought would be needed. It is a conditional statement. That is what the word “provided” means.

    And that doesn’t imply that things will change unless they stay the same. The short term price elasticity has changed quite a bit. Seeing that evidence it is not unreasonable to revise one’s prior probability/beliefs concerning the magnitude of the long term price elasticity and to revise it downwards.

    We know that. It’s actually the odds of the “unless”….

    Considering you’ve gone badly off the rails here, the rest isn’t worth responding to other than to say it is not at all out of the ordinary for a paper to suggest avenues for further research.

    And what is even more amazing is you sit there spouting off about the Prius when that is exactly the kind of thing the authors are pointing to as a way to reduce consumption. They’ve arrived at a conclusion that suggests that technology would be better at reducing consumption than taxes. I’d argue that due to Jevon’s Paradox you’d also need a tax as well, but that is a refinement.

    You truly are so blinded by your own dislike for economics you can’t even honestly evaluate an article that actually supports your position.

    There is no way to quantify it.

    Actually there is, its called Bayes theorem. Idiot.