Lessons of the Move from Hybrids Back to SUVs
This past week, Lawrence Ulrich of the New York Times reported that lower gasoline prices were reducing the market for hybrid and electric cars. Ulrich observed that:
Affordable gasoline is making hybrid car owners rethink their loyalty. With bargain gasoline prices putting more money in the pockets of Americans, owners of hybrids and electric vehicles are defecting to sport utility vehicles and other conventional models powered only by gasoline, according to Edmunds.com, an auto research firm. There are limits, it appears, to how far consumers will go to own a car that became a rolling statement of environmental concern. In 2012, with gas prices soaring, an owner could expect a hybrid to pay back its higher upfront costs in as little as five years. Now, that oft-calculated payback period can extend to 10 years or more.
This shift in consumer attitudes demonstrates that mass behaviors that lead to a sustainable and renewable economy will not come from a simple desire to protect the environment. Hybrids and electric cars are more expensive than traditional autos and as long as that is the case, they will have difficulty competing with them. Price, quality, reliability and convenience all factor into consumer decisions and no one should be surprised that lower gasoline prices changes the consumer’s calculus.
It is a mistake, however, to assume that these choices indicate a reduction in support for protecting the environment. But transportation is a complicated phenomenon. In the developing world, the use of cars is expanding at a ferocious rate. Automobiles are both a status symbol and a means of transport in the developing world. Here in the United States, our pattern of land use development requires automobiles–or, at a minimum, some form of personal transportation. Nevertheless, many people are getting tired of congestion and some are seeking mass transit alternatives or more urban lifestyles. According to the American Public Transportation Association: “Americans took 10.8 billion trips on public transportation in 2014, which is the highest annual public transit ridership number in 58 years.” I suspect the lure of the open road has come to an end with the end of truly open roads. As soon as we build a road to relieve congestion, people take advantage of the new roads and move further out of town. Before long, the new road is congested and the cycle repeats itself. More and more Americans spend more and more time stuck in traffic. In the New York region, the network of Robert Moses–built parkways, beautiful winding landscaped highways–has now been retrofitted for modern commuting. Taking a Sunday “pleasure” drive is a distant memory for many. We drive to get places, not for the pleasure of movement or to enjoy the scenery.
The electric car will achieve higher market share when prices come down, charging is more convenient and less frequent, and gasoline rises in price. Few people are in love with the internal combustion engine and a cheap, convenient and reliable electric car would win in the marketplace. But the movement away from hybrids to larger cars provides an excellent example of the limits of “responsible consumerism.” Like corporate social responsibility, these notions only work when they line up with self-interest. Enlightened self-interest makes sense. Consumer and corporate behavior is by definition about self-interest. Corporations are organized to make money. Consumers spend their money on goods and services that provide maximum benefit. We want their behavior to be “responsible” and it is good when they get there on their own, but it makes little sense to build a system around altruism.
If society wants corporations and individuals to behave a certain way, then the market must be structured through law, regulation, and the tax system. It is possible and necessary to use government to bring about sustainable corporate and individual behavior. In small ways, this is already underway. Take the example of streaming music and video. Most of the basic science of the Internet was invented in government laboratories and in university labs funded by the U.S. government. Back in the days of Blockbuster Video and Tower Records, we would buy or rent physical CDs, tapes, records, and DVDs. Massive amounts of resources were devoted to these forms of home entertainment. Today, brick and mortar stores and physical media have been replaced by products that do not need to be manufactured, shipped or packaged and do not require warehouses or physical retail outlets.
Remove the Defense Department’s research on the Internet and we are back at Tower Records or Blockbuster shopping for entertainment. Whatever the virtues of that social interaction (and I admit that I miss record stores and hope that book stores survive), streaming video consumes far fewer material resources than mass production and distribution of physical media.
I know the Republican right wing thinks that government should not be picking winners and losers for business investment, and I suspect they are correct. But that does not mean we cannot define socially irresponsible corporate and individual behavior as illegal or unwanted and structure public policy to encourage good behavior and discourage bad behavior. That is why charitable donations and mortgage interest can be deducted from your income for tax purposes. As a nation, we want to encourage charity and home ownership. That is hardwired into our tax system and is long-established public policy. Similarly, we should want to encourage energy and water efficiency, recycling, better waste management, and the use of renewable resources in every sector of the economy.
If hybrid and electric cars fail in the marketplace, we need to make better and more competitive hybrid and electric cars. Shaming people into buying these cars is a waste of time. Instead, we need to excite consumers about the excellent features and lower price of the newly designed vehicles, once they are developed.
The movement for corporate responsibility is related to the effort to make consumers feel guilty for buying irresponsible products made by irresponsible corporations. People should be made aware of what they are buying and how it is made. And this awareness can and does have an impact on the market. However, the attempt to shame consumers helps create a negative image of environmentalists as scolds and people who want you to “do without.” You know: Turn off the lights, don’t drink bottled water, don’t drive big cars, don’t eat meat, keep the house cold in winter and hot in the summer, don’t water the lawn… This list goes on and is the very definition of a losing political strategy.
Modern economic life is not about denial but about fulfillment. The key is to redefine that fulfillment in ways that do not destroy the ecosystems that provide us with the air, water and food we rely on. The hidden hand of the market is a tool in that redefinition process, but the visible hand of government and public policy is needed as well. Build an economy that emphasizes ideas, health, wellness, fitness, entertainment, art, culture and media and de-emphasizes more and more material consumption. Focus on economic “software” rather than hardware.
The lesson of the move from hybrids to SUVs is that consumer choice must be fully understood as we make the transition to a sustainable economy. My wife and I bought a car last summer and the factors that dominated our choice were safety, price and reliability. We don’t drive very much (less than 3,000 miles a year) and we are far from a typical consumer. We looked at hybrids, but in the end, could not find one that met our needs. If we want to encourage autos that are more fuel efficient, and ultimately cars that rely on renewable energy, we need to start with the factors that influence consumer choice. Incentives and rules can be developed that increase the probability that people will purchase the product that is best for the planet. If we combine the power of the market with the power of government we can gradually make the transition to a sustainable economy without too much pain and with a minimum of guilt.