Responding to Cox and Poole, Part 3: Is it “Just” the Economy? And Does it Matter Anyway?

It has been a while, but it’s time to return to our lengthy response to the critiques by demographer Wendell Cox and the Reason Foundation’s Robert Poole of our May report on the implications of changing transportation trends, A New Direction.

You can read Parts 1 and 2 of our response for yourself, but here’s the story so far: In Part 1, we responded to the suggestion that the decline in vehicle travel over the last eight years is nothing that was unexpected or out of the ordinary (and the corollary implication that America’s transportation policy need not change as a result). In Part 2, we responded to the assertion that members of the Millennial generation and other Americans are not switching to transit or other non-driving modes of transportation or increasingly pursuing walkable lifestyles.

In this installment, we take on what is, on the surface, Cox and Poole’s strongest argument: that the economic conditions of the past decade are at the root of the recent changes in transportation behaviors.

Let’s give the floor to Wendell Cox for a moment. He writes, “In the context of rising gasoline prices, and economic trends, the real news is not how much driving has fallen [since 2005], but rather how little.”

Is he right? Let’s start by looking at the economy. Poole argues that young, employed males drive twice as many miles per year as those without jobs. Given the dramatic uptick in unemployment – especially among youth – during the recession, wouldn’t this explain the recent downturn in driving?

Partially, but not entirely. Our 2012 report on changing youth driving trends found that per-capita driving among employed 16 to 34 year olds declined by 16 percent between 2001 and 2009.That’s not as great a decline as the 23 percent decline among young Americans as a whole, but it’s also not nothing. We also found declines in per-capita driving among young people in households making more than $70,000 per year. So unemployment and the recession certainly had some impact on driving trends among Millennials, but they aren’t the whole story.

What about gas prices? Todd Litman at the irreplaceable Victoria Transport Policy Institute keeps running track of studies on transportation elasticities – the economics term for the degree to which changes in, say, the price of fuel affect consumer behavior. In the short run – that is, in the immediate aftermath of an increase in gas prices – vehicle travel is relatively inelastic; it is highly resistant to change. There is a lot of disagreement in the studies, but those cited by Litman suggest a range of roughly -0.026 to -0.12 – that is, for every 10 percent increase in the price of gasoline, the number of miles driven could be expected to decline by somewhere between 0.26 percent and 1.2 percent.

In the long-run, however – say, after five years of higher prices – the effect on driving is much greater, with elasticity values in the neighborhood of -0.15 to -0.3. In other words, for every 10 percent increase in the real cost of gasoline, one could expect driving to decline by 1.5 to 3.0 percent.

What’s been happening lately? Between 2005 and 2011, the inflation-adjusted cost of a gallon of gasoline increased by 35 percent (not “one and one-half times” as Cox erroneously concludes by comparing gasoline price increases from 2002 to 2011 with changes in per-capita driving between 2005 and 2011). If this were a short term change, the effect on driving would be small. But, as anyone who has lived through the last decade will tell you, gasoline prices have been consistently high for much of that period. The “long run” has arrived. And that means we might expect a decline in driving of between 5.25 percent and 10.5 percent. Per-capita VMT actually declined by 6.5 percent during that period – within the range of what might be expected.

Aha, you might be saying to yourself, maybe Cox is right. Maybe it really has been gas prices – rather than any “falling out of love with the car” that has been behind the changes in driving patterns among Millennials and others.

But before jumping to that conclusion, it’s important to consider why individuals’ response to high gas prices is so much greater in the long run than in the short run. Here’s Todd Litman:

Transportation elasticities tend to increase over time as consumers have more opportunities to take prices into effect when making long-term decisions. For example, if consumers anticipate low automobile use prices they are more likely to choose an automobile dependent suburban home, but if they anticipate significant increases in driving costs they might place a greater premium on having alternatives, such as access to transit and shops within convenient walking distance. These long-term decisions affect the options that are available. For example, if consumers are in the habit of shopping in their neighborhood, local stores will be successful. But if they always shop at large supermarkets, the quantity and quality of local stores will decline. For this reason, the full effects of a price change often take many years.

A prolonged period of high gas prices, therefore, leads people to make choices that reduce their exposure to those prices. They buy more fuel-efficient cars. They move to neighborhoods that are closer to their place of work. They build lifestyles that enable them to walk, bike or take transit to places they need to go. In short, they do all the things that Americans – especially Millennials – have been doing in increasing numbers over the last several years.

At the same time, in a sort of virtuous cycle, the number of options that allow people to live car-free or car-light lifestyles increases. Venture capitalists start plowing money into things like car-sharing and bike-sharing. Apartment construction in walkable areas booms. Living car-free or car-light lifestyles becomes more attractive, prompting more people to want to try it. Pretty soon you have a trend on your hands.

Now, you may not subscribe to the notion that Americans’ transportation and lifestyle choices are so slavishly driven by economic factors – I sure don’t. But regardless of whether you think that Millennials are driving less because they’re responding to economic signals or because they are striking out in a new cultural direction, the implications for the future are pretty much the same.

Why? Because most of the factors to which Cox and Poole attribute the recent change in driving patterns – high gas prices, economic growth that is slower than that seen during the postwar boom, economic pressures on young Americans (such as student loan debt), graduated drivers’ licensing laws – aren’t likely to go away any time soon.

And even if they do go away, it’s important to remember that the short-term/long-term elasticity thing works in reverse, too – that is, if the price of driving should drop, or the economy should improve, it will take time for drivers’ expectations to react to those changes as well.

My stepdad is a great example of how this works. As a child of the 1950s, he was a car freak. He raced stock cars on dirt tracks around Pittsburgh in the 1960s and followed NASCAR religiously. As an adult, he bought a new car every three years and kept doing so way past the time when it was financially feasible. And when it was suggested, as his health was failing him in what turned out to be his final days, that he might be limited in how much he could drive, it was as though a little piece of him died inside. Circumstances changed, but he never did.

Will members of the Millennial generation, growing up in a profoundly different era, hold on to their changed transportation preferences and practices as they age, even if their circumstances change? Nobody really knows for sure, which is why our recent report not only acknowledges but embraces uncertainty by teasing out what the implications of various futures might be. In our fourth and final post, we’ll describe why the notion of uncertainty in transportation planning is so disruptive, and explore why critics of our approach can’t quite seem to comprehend it.