Gallons Per Mile
By CHRISTOPHER SHEA
As gas prices rose earlier this year, consumers started paying a lot more attention to their cars’ miles per gallon. Good luck with that. The apparently simple unit of measurement is a highly misleading one, as two Duke management professors demonstrated in a June issue of Science. They favor an alternative measure of fuel economy: gallons consumed per 10,000 miles.
The problem with m.p.g., argues Richard Larrick, who wrote the article with his business-school colleague (and carpooling partner) Jack Soll, is that it leads consumers to significantly underestimate the gains in fuel efficiency that can be achieved by trading in very low m.p.g. vehicles — even for one that gets only a few more miles per gallon. Less detrimentally, m.p.g. also misleads people about the fuel savings achieved by moving from an ordinary family sedan into a Prius.
Larrick emphasizes that his long-term goal is to get everyone into the most fuel-efficient vehicles that exist. But right now, he says, “as a national-policy question, the urgency is getting people out of the 14-m.p.g. vehicles.” And m.p.g. ratings aren’t the most useful prod, largely because the real significance of differences in m.p.g. is often counterintuitive. The jump from 10 to 20 m.p.g., for example, saves more gas than the one from 20 to 40 m.p.g. The move from 10 to 11 m.p.g. can save nearly as much as the leap from 33 to 50 m.p.g.
Consider the much-mocked S.U.V. hybrids, which seem to offer only incremental gains. Someone who trades in an all-wheel-drive Cadillac Escalade (14 m.p.g.) for an Escalade hybrid (20 m.p.g.) would save 214 gallons of gasoline over the course of 10,000 miles.
That’s about as much fuel as would be saved by two people currently driving 33-m.p.g. cars who switch to 50-m.p.g. hybrids, assuming everyone drives the same distance.
Consumers don’t get this. The Science article summarized three studies in which Duke students or participants in an online survey botched calculating m.p.g. trade-offs. In one case, 75 percent of the test subjects got the question wrong. When the calculations were reframed, however, using both m.p.g. and gallons used per 100 miles — 64 percent got it right. (Gallons per 10,000 miles further clarifies efficiency differences, the authors say.) Not long after the Science article appeared, the Energy Department and Environmental Protection Agency Web site fueleconomy.gov added a feature that lets users compare cars using gallons per 100 miles. Not a bad first step.
Gas That’s Always Less Than $3 a Gallon
By EMILY BIUSO
This spring, gas prices were inching upward, hybrid sales were on the rise, the “staycation” was getting a lot of lip service and the American automakers’ overreliance on S.U.V.’s, trucks and other gas guzzlers was looking more foolish than ever. In this anxious climate, Chrysler tried to attract buyers with a radical promotion: $2.99-a-gallon gas for three years.
Car companies had previously made use of gas-based incentives — recently Suzuki offered American buyers free gas for three months — but never before had a company directly sought to stabilize fuel costs on a long-term basis for their customers. It worked like this: If buyers chose the gas incentive (instead of other options like 0 percent financing), they got a gas card that was linked to their personal credit card. Gas purchased on the special card transfers only $2.99 a gallon to their personal credit card, while any additional cost — as much as a dollar more per gallon during peak gas prices this summer — would be paid by Chrysler. The deal was good for 12,000 miles per year for three years, and Chrysler financed the effort by purchasing oil futures as a hedge.
Critics charged that Chrysler was championing bad behavior by encouraging customers to burn more gas in fuel-inefficient vehicles. But Chrysler says the promotion actually appealed to buyers of the company’s more fuel-efficient vehicles, like the Sebring (a sedan with 30 highway miles per gallon). Though the promotion boosted Web chatter and foot traffic in Chrysler dealerships, American sales for the company sank even lower. Chrysler sold 98,000 vehicles in July, its lowest monthly figure in decades.
Chrysler conceived the offer to promote “stability and peace of mind” — a kind of insurance for the buyer concerned about sky-rocketing gas prices, says Stuart Schorr of Chrysler, who led the publicity campaign. But the inherent risk in taking the promotion became very apparent last month, when gas prices tumbled to an average of $1.89 and some buyers with the $2.99 gas card were left to second-guess their choice. But, Schorr says, “when you buy a health-insurance policy, are you mad when you are healthy?”
Genopolitics
By EMILY BIUSO
Why do some people vote and others stay home on Election Day? For years, scholars have assumed that a voter pulls the lever because she grew up in a voting household or perhaps sat through a lot of civics classes. But this year two political scientists published studies claiming that in addition to environment, genes may be a primary influence on political engagement. Not only that, they think they have identified the genes that increase the likelihood of voting. A political scientist who advocates this approach calls this emerging field genopolitics.
James Fowler and Christopher Dawes of the University of California at San Diego encountered skepticism when they came up with the initial idea of matching public voting records with twin registries, but they eventually persuaded a U.C.L.A. psychologist to work with them. Using a registry in the L.A. area, they confirmed their hypothesis that identical twins (who share 100 percent of their genes) will show more similarities in voting behavior than nonidentical twins (who share, on average, only 50 percent) and extrapolated that 53 percent of the variation in voter turnout can be attributed to a difference in genes. Fowler was “stunned” by the size of the effect, and the results, published in May, received a lot of attention.
In their next study, published two months later, Fowler and Dawes determined that two specific genes — both known for their role in regulating serotonin — are associated with voting. Fowler and Dawes do not, of course, say that evolution has endowed us with specific genes for voting. There is no gene that makes someone a “voting robot,” as Fowler puts it. Rather, they propose that these genes shape certain personality traits and decision-making styles, which cause us to react to our political environment — and our ballot — differently. Fowler and Dawes have written that they are following up on Aristotle’s observation that “man is by nature a political animal.” As it turns out, they may be proving that only some men fit the bill.
Goalkeeper Science
By CLIVE THOMPSON
What’s the best way to stop a penalty kick? Do nothing: just stand in the center of the goal and don’t move.
That is the surprising conclusion of “Action Bias Among Elite Soccer Goalkeepers: The Case of Penalty Kicks,” a paper published by a team of Israeli scientists in Journal of Economic Psychology that attracted attention earlier this year. The academics analyzed 286 penalty kicks and found that 94 percent of the time the goalies dived to the right or the left — even though the chances of stopping the ball were highest when the goalie stayed in the center.
If that’s true, why do goalies almost always dive off to one side? Because, the academics theorized, the goalies are afraid of looking as if they’re doing nothing — and then missing the ball. Diving to one side, even if it decreases the chance of them catching the ball, makes them appear decisive. “They want to show that they’re doing something,” says Michael Bar-Eli, one of the study’s authors. “Otherwise they look helpless, like they don’t know what to do.”
Interestingly, the goalies’ behavior violates “norm theory,” which suggests that when people are faced with a tough problem, they often choose inaction, because a bad outcome looks worse and causes more regret when it appears to be the product of a bad decision. Better to do nothing and hope the problem goes away! But in soccer, this paradigm is reversed.
And it may not be just goalies that operate in this fashion. Bar-Eli suspects the behavior erupts during financial crises too. The temptation to appear decisive — particularly when you’re being heavily scrutinized — can be overwhelming. So during periods of economic turmoil, C.E.O.’s might be tempted to change their corporate strategy, or investment managers to juggle their portfolios, even when staying put is the wisest course. “I know an investment manager whose clients will be calling him on the phone saying: ‘Do anything! Just do something! I cannot sit and look at how my shares decline!’” Bar-Eli adds.
The same goes, of course, for presidents and politicians, who face enormous pressure to “fix” the economy even if they haven’t got a clue what to do. Perhaps our current economic crisis has been driven by precisely this dynamic: a global financial system that jumped — the wrong way — for the ball.
Guaranteed Retirement
Account, The
By STEPHEN MIHM
This fall, millions of Americans got a nasty shock when they opened up the reports for their individual retirement accounts and 401(k) plans. With double-digit returns a thing of the past, there’s an understandable nostalgia for the modest but predictable defined-benefit pensions an earlier generation of workers relied on in retirement. Now there’s a proposal that revives the idea but makes it a universal, government-sponsored program.
Teresa Ghilarducci, an economist at the New School for Social Research, has emerged as the primary exponent of “Guaranteed Retirement Accounts,” or G.R.A.’s. The way they work is simple: workers who don’t have access to a conventional defined-benefit plan would contribute 2.5 percent of their income (with the government seeding the first $600 of that amount). Their employers would then kick in another 2.5 percent. It’s similar to a 401(k), except that the money would be deposited into an individual account with the Social Security Administration, which would pool the money and put it into relatively conservative investments.
In administering the pool, the government would guarantee a 3 percent rate of return above and beyond inflation. On retirement, participants would receive an inflation-indexed annuity that Ghilarducci calculates would replace a quarter of the wages or salary an average worker was earning. For example, someone who contributed to a G.R.A. for 40 years and retired with a final salary of $60,000 would get an annual payment of $15,500, or 26 percent of the preretirement income. (Social Security currently provides another 45 percent of workers’ preretirement income.)
Like Social Security, the plan would be mandatory. Requiring workers to hand over an additional share of their income might not be popular. But Ghilarducci argues that only a program that forces people to save will prevent huge numbers of Americans from sinking into poverty during retirement. As for how to finance the new program, Ghilarducci has pointed out that reforming tax breaks for 401(k)s, which go disproportionately to high-income earners, would more than pay for the G.R.A.’s. Is such a plan plausible? “The last time the financial system was shattered,” she says, “Social Security was born.”