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The MPG Illusion

Catherine Wolfram, faculty co-director, Energy Institute at Haas | June 3, 2013

It’s the beginning of summer, which means the beginning of driving season. Perhaps anticipating summer driving, many people bought new vehicles last month, putting automakers on track to have the best year since 2007.

So, here’s a question, particularly for readers who were part of this vehicle-buying wave:

Which of the following two choices leads to more fuel savings:

(A) buying a 15 mpg Cadillac Escalade instead of a 12 mpg Chevrolet Suburban, or

(B) buying a 50 mpg Toyota Prius instead of a 29 mpg Toyota Corolla?

Assume you would drive the same distances and speeds no matter which car you have.

MPG Ratings for Corolla and Prius

The answer is (A), though several academics have discovered that many people get answers to questions like this wrong.

In case you were one of them, here’s a quick explanation. If you were going to drive 100 miles, it would take 8.3 gallons in the Suburban and only 6.7 gallons in the Escalade, so you’re saving 1.6 gallons for every 100 miles driven. By contrast, buying the Prius instead of the Corolla means using 2 gallons for every 100 miles instead of 3.4, so only saving 1.4 gallons over 100 miles.

But, mistakes – like answering (B) instead of (A) –  appear so pervasive that academics have labeled the phenomenon the “MPG Illusion.”

In an article published in 2008 in the journal Science, two Duke University business school professors, Richard Larrick and Jack Soll, reported results from surveys they administered to undergraduates. They asked the undergraduates to rank five comparisons, like the two above, and found that only one respondent out of 77 got the correct ranking.

Larrick and Soll’s research suggests that people think that improvements in MPG ratings translate linearly into reductions in gasoline consumption. People think, for instance, that increasing fuel efficiency from 12 to 13 MPG is the same as increasing from 22 to 23 MPG. But, the relationship does not scale linearly.

In a blog post on their Science article, Larrick provides this graph plotting gasoline used per 10,000 miles against MPG. The large gas savings from small changes in MPG at low MPG levels are clear.

In a recent paper, NYU economics professor Hunt Allcott broadens the surveyed population beyond undergraduates to a representative sample of Americans, and asks them to compare the gas consumed by cars they own to gas consumed by cars they recently contemplated purchasing. Again, he finds evidence of MPG Illusion.

MPG illusion and energy policy?

So, if vehicle purchasers suffer from MPG Illusion, what are the repercussions for energy consumption and energy policy? In general, MPG Illusion suggests that consumers are likely purchasing both too many gas guzzlers and too many super-efficient plug-in hybrids, and avoiding vehicles with mid-range MPG ratings more than they would if they weren’t under the MPG Illusion.

In other words, consumers are mistakenly thinking that a Suburban is not that much worse in terms of fuel consumption than an Escalade, so purchasing too many Suburbans.

From a policy perspective, though, addressing the MPG Illusion would seem relatively easy. The EPA already mandates labeling on new vehicles, and these feature MPG ratings prominently. What if instead, labeling encouraged consumers to think about gallons of gas used per 10,000 miles driven?

In ongoing research, Hunt Allcott and Chris Knittel are running an experiment to test whether providing more information to prospective buyers in vehicle dealerships impacts which car they purchase. They are showing information on gas consumption, like what’s contained in the screenshot below, to a randomly selected set of prospective new vehicle buyers. Then, they will compare car purchases between prospective purchasers who see the screenshots and purchasers who were randomly selected into a control group and don’t see the new information.

Allcott Knittel Screen Shots1

My prediction is that there are enough people who are buying the super-efficient vehicles just because they are the best available, and not necessarily because they’re doing a calculation (perhaps wrongly) on the likely fuel savings relative to something else. After all, Prius drivers like Cameron Diaz and Larry David are unlikely to opt for the Corolla once dispelled of the MPG Illusion.

Cameron Diaz and her Prius

So my guess is that Allcott and Knittel’s screenshots will keep people out of Suburbans more than it will keep them out of Priuses (actually, “Prii,”according to Toyota). If I’m right, providing information like Allcott and Knittel’s may turn out to be a highly cost-effective energy-efficiency policy. Stay tuned for the actual results.

Cross-posted from Energy Economics Exchange (tag line: Research that Informs Business and Social Policy), a blog of the Energy Institute at Haas.

Comments to “The MPG Illusion

  1. Two years ago an item here on the Berkeley Blog told us that the 2013 sticker labels on automobiles would be much more informative and realistic than the 2008 version of the labels.

    That article was a little more open and frank about the competing interests involved in informing the public versus selling an inherently damaging product that hurts the commonweal in order to profit the 1%.

    What happened to the work that was going on in this area back in 2011? Your article above seems like backsliding.

    Some of the confusion that commenters below express may be due to the failure to distinguish between the business school understanding or framing of progress and the citizen understanding of progress: you argue that being able to report better numbers (greater proportional reduction) is more important than actually mitigating the problem (too much pollution, too much consumption).

    From your point of view, getting a milkshake that is 2/3rds bleach down to just 1/3rd bleach is a bigger win than getting a milkshake that contains 5% bleach to be bleachless. The former is a bigger ‘savings’ than the latter, but which one do you want your grandkids to gulp down on a Sunday afternoon?

    Even and especially your use of the term ‘savings’ in your explanation of the quiz question disguises the consumerist agenda and confuses the issue for people. Careful readers, as evidenced in the other comments, see that you call the vehicle with better fuel economy the one that is ‘only saving’ 1.4 gphm, making it seem like an Escalade is an economical choice. That is indeed confusing, because it’s wrong.

  2. Really interesting post, Prof. Wolfram. Thank you! Despite having a graduate degree from the Energy and Resources Group, I too was very tempted to answer “B” instead of “A.” I agree that MPG is a counterintuitive metric in that regard. This is a good example of how appropriate metrics can potentially encourage consumers to make wiser choices.

  3. I interpret the MPG “illusion” a bit differently. If the buyer is concerned about improvements in energy efficiency, the MPG illusion simply says that people in the low MPG don’t realize small MPG changes can have a big impact. But there is no such thing as too many super-efficient hybrids if the buyer is concerned about, say, minimizing carbon emissions: and increase in MPG is an increase in MPG, and less CO2 is emitted, even if the impact is relatively smaller than a similar improvement at lower MPGs. Not to say a better indicator like “gallons per 10,000 miles” would be helpful at conveying fuel savings more accurately, this is true. Especially in the case where carbon has a price and people want to get the most “bang for their buck” (economic efficiency) when making decisions to reduce CO2 emissions on a budget. Or in a two-car family that is trying to decide if buying the Suburban (12mpg) and Prius (50mpg) vs. the Escalade (15mpg) and Corola (29mpg) will be more energy efficient. But in this latter case, when one can afford it: why not just choose the Escalade and Prius?

    • I tend to agree with you, that although the MPG illusion is real, a carbon conscious consumer is going to do the most help by going for fuel efficiency.

      But the most viable program to reduce fuel usage, as much as it sucks to say as a consumer, is increasing prices. Long-term elasticity of demand for gasoline relative to prices is relatively high and behavior will trend toward reduced consumption.

  4. Reminds me of the story of the wife who said this coupon book saves us $5 at the mall for every $100 we spend, so if we just buy everything at the mall we’ll be rich.

    You appear to be using innumeracy as a way to promote consumption, the way Grover Norquist uses the flat tax scheme to promote the further redistribution of America’s wealth away from the 99% and towards the 1%.

    You slightly gloss over the crux of the issue by writing that people are buying too many gas-guzzlers and too many hybrids — the problem is that people are buying and using too many personal cars. Policy that gets people into small efficient cars is better than policy that encourages big cars, true, but only in the sense that adding small amounts of poison to your picnic lunch is better than adding lots of poison to your picnic lunch.

    The better policy is one that makes it very difficult to poison anyone’s lunch.

    If we developed signage and communication that educated people about the true costs of personal car ownership, we’d be telling them that our entire modern physical and social infrastructure is built on lies — car culture trumps slavery as fundamentally corrupt, immoral, and unnatural. We’ve despoiled our descendants’ lives in order to keep automobile companies and oil companies in business.

    Reap-the-whirlwind and all that, y’know.

  5. I think you’re saying that there’s a public misunderstanding about how MPG is calculated, and that there needs to be a better job in communicating this. If so, it’s ironic that I still don’t understand your point. I’ve read this more than once. I’m well educated. I agree–it needs to be communicated more effectively.

  6. While interesting and shall we say mathematically true it leaves me with a question about the people who “got it wrong” when asked the opening question.

    Did the people who answered the question wrong get a calculator and the expectation to do the math? Or were they just being asked to answer the question in a way that assumes you should give an estimate on the spot?

    Not that you couldn’t do the math in your head, but there is a real difference in someone handing you pencil and paper and asking you a math question vs. a more off-the-top-of-the-head kind of approach.

    Because you know if the correct answer is 1.6 and someone estimated 1.4 we would generally call that close enough on an estimated answer.
    I’d be betting that a 100% of those asked get the correct answer if handed a calculator before question is asked.

  7. While your post presents a valid point, it misses some important insights. From you numbers we can further conclude that a greater savings can be realized by switching to a smaller car. When taking passenger capacity into account, the gallons per passenger mile of the Prius is still lower.

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