Thursday, February 21, 2008

Is Auto Ownership Tied to a Reduced Savings Rate?

We know that cars cost a lot of money. Aside from the up front capital cost, operations cost people at least $8,000 per year. But ever since cars were produced for the working man by Henry Ford, it looks as if the purchase and ownership of these vehicles has cut into American wealth accumulation. If you look at the savings rate over the last century, it seems to be an inverse relation to auto ownership. This chart created by Scott Bernstein at the Center for Neighborhood Technology shows this relationship. (I've seen this chart in a number of iterations but this is all I could find online)

While everyone thinks that America is a wealthy nation, many people spend a good portion of their money on transportation. But it doesn't have to be this way. Cities that have good transit networks allow people to save money and cut overall emissions.

I want to reiterate that I think cars are an important part of our transportation network, but I think our complete dependence on them in most of the United States will lead many to the poorhouse sooner rather than later. In order to stem the tide, we need good transit. It allows people to pool their resources to pay for transport and allow for the building of wealth.


Nick said...

Interesting stuff.
But you need to be wary of the causation versus correlation argument. I highly recommend the book Fooled by Randomness for examples on how statistics (like misapplying a causation argument) is so frequently misused.

Alon Levy said...

These charts don't prove anything. All they show is that in times of war and recession people buy fewer consumer goods. It's natural for car sales to inversely correlate with saving; it's natural for there to be the same correlation with televisions, clothes, and books, at least in the short term. When you look more broadly, the correlation evaporates. For example, Japan has more rail ridership and fewer car trips than the EU, but the EU has a higher savings rate.

As for the transit ridership chart, it doesn't show any national trend. The vast majority of American transit ridership has always been in New York. Right now the New York City Subway accounts for two-thirds of national heavy rail ridership. In the 1940s, when there was no DC Metrorail, it was even higher. And in the last fifteen years, rail ridership has been edging up while the savings rate has crashed.

M1EK said...

As usual, people make the incorrect assumption that cars depreciate per-mile enough to be worth worrying about.

I refer you again to this crackplog - almost all the depreciation you suffer as a carowner is a function of time, not miles.

The IRS reimbursement rules depreciate by miles because it's the only method they can possibly use for a personal vehicle used for business; not because it's right for personal use. You don't save remotely this much money by leaving your car parked in the driveway (as anybody with a car will tell you).

M1EK said...

Whoops; that comment was supposed to be on your other post. Der-hey.

Pantograph Trolleypole said...

No it doesn't have an r squared of 100. But its interesting nonetheless. Notice the title has a question mark.

M1ek you should post that under the other post. There are lots of things that the google cost comparison misses including tolls, parking and other stuff.

M1EK said...

Well, it's impossible for them to know the cost of parking; although they could certainly talk about tolls. (Maybe they do; I've gotten directions from one of the map services on a business trip that told me when I'd be paying a toll...)

The relationship isn't anywhere near 100% - I estimated about 10% of depreciation was due to miles; 90% due to age.

Will paste to other post now.