miles per gallon

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Take a look at the above fuel efficiency label? Can you understand it? Do you think other people can?

Last week, the Environmental Protection Agency released two options for replacing the current fuel efficiency stickers displayed on new car windows. Before releasing these options, the EPA conducted an online survey and sixteen focus groups held around the country, the results of which the Nudge blog has been looking through.

Hopefully, you first noticed the two numbers at the bottom of the label, 4.5 and 3.3. Unless you’re buying a Ferrari, those probably seem too low for a standard miles-per-gallon statistic, right? You look closer and notice that they aren’t MPG numbers at all; they are GPM (gallons per mile) numbers.

GPM is a statistic in the news, thanks to work on the MPG Illusion, which shows that people misunderstand the non-linear relationship between gallons of gas consumed and distance traveled. One of the major implications of this research is that it obscures the value of improvements as fuel efficiency improves. People tend to undervalue small mpg improvements on inefficient gas guzzlers, and overvalue large jumps between two fuel sippers, like a Honda Civic and a Toyota Prius.

There have been many proponents of a new GPM metric, and the New York State Senate recently passed a law requiring it in car dealership showrooms. As part of its research, the EPA investigated consumer response to the concept. For the moment, the EPA found that consumers struggle with the MPG illusion, even when it is explained to them. For those who were able to understand the concept, they still expressed a preference for MPG over GPM because they were used to thinking in MPG terms. The EPA concluded:

It may be said that understanding the MPG illusion is extremely difficult to achieve and does not necessarily lead people to switch to a different type of vehicle nor does it make them prefer gallons per 100 miles over MPG. In essence, people prefer familiarity over facts.

Focus group respondents found the label shown above particularly confusing, not just because of the GPM statistic, but because it is presented in the slider in the upper right-hand corner with a range of 2 (best) to 10 (worst). Without a general knowledge of gas guzzler and hybrid GPMs, the scale made little sense. In the end, the EPA decided to continue using MPG estimates as the primary fuel consumption statistic. “If there is a desire to introduce ‘gallons per 100 miles’ estimates,” the agency concluded, “do so in a way that positions it as additional information and use the same font size for presenting the MPG and gallons per 100 miles information.”

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A new fuel efficiency bill passed by the New York State Senate includes a provision for helping drivers think in “gallons per 1,000 miles” (GPM) instead of the traditional miles per gallon (MPG).

The idea is originally the brain child of Richard Larrick and Jack Soll who blogged about it earlier. Larrick and Soll’s original proposal called for gallons per 100 miles driven, but they fully endorse the New York Senate bill, which would require car dealers to put up a poster in their showrooms with a conversion chart showing consumers how to calculate GPM.

1. 1,000 miles is roughly what the average American drives in a month, so it is a meaningful number

2. It allows easy estimation of yearly consumption (multiply by 10, roughly)

3. It avoids the problem of seemingly small differences in efficiency that occurs when comparing “gallons per 100 miles”

In New York, the heavy lifting on the bill, the first of its kind in the U.S., was done by Senator Daniel Squadron. Reached by phone after the bill passed 35-26, Squadron said he was laughed at on the floor of the Senate by some opponents. “Folks had a difficult time telling why this is necessary,” he said. “They said this (gas mileage) information already exists, why would anyone need it? They can do the conversion themselves.”

Apparently, there are many assembly members who think New York state is full of Econs.

A similar bill exists in the state’s Assembly. Squadron said there is some momentum for it, but that lots of work still needs to be done. “We’re hopeful,” he said.

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Richard Larrick, who guest blogged for us, points to a graph from The Green Grok showing gas money savings for mpg improvements over 1,000 miles at three fuel efficiency levels. They equate to driving a Jeep SUV (red), a Camry (blue), and a Civic (green). The figure assumes $4 per gallon gas.

You can also watch Larrick and co-author Jack Soll in this spot produced by Duke University.

[youtube="http://youtube.com/watch?v=K2XSuw02vKA"]

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Understanding miles per gallon seems so easy. Richard Larrick and Jack Soll of Duke University’s Fuqua School of Business explain why the concept trips up most of us. The duo recently published a paper in Science titled “The MPG Illusion” that has received a national media attention (listen to the Science podcast here.). For a taste of the research and a test of your fuel efficiency expertise, take this quiz.

The Nudge blog invited Larrick to write a post summarizing his findings (with a more in-depth description of the three studies he and Soll conducted), and clearing up major misconceptions about his research that have been reported in the press. We are delighted to have him share his thoughts.

Read Larrick’s post here.

(Hat tip to three Nudge readers – Bob Bateman, David Hagmann, and Mostly Economics – for noticing the MPG Illusion.)

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