What about Gasoline?

Jim Tankersley takes Don Boudreaux and Mark Perry to task over at Wonkblog for their selective picking of “basic necessities”:

It’s undeniable, and a great thing, that Americans are living longer. But the second point – that we’re spending less on “basics” – well, that turns out to depend a lot on what you call “basic.”
Boudreaux and Perry count the basics as food, clothing, shelter and cars. Fine. But what if we add in gasoline (to run those cars), health care (to help us live longer) and education (which is increasingly required for getting and keeping a middle-class job)? Then the math looks a lot different.

Lets leave health care and education aside for a second and focus on gasoline. Is it true that the US “middle class” are spending a lot more on gasoline nowadays? Well, I suppose we can take a look.

Eyeballing this chart, I would say that the average inflation adjusted gas price in 1950 (in 2012 dollars) was about $2.50. Using Federal Highway Administration figures found here, vehicle miles traveled (VMT) seems to have been 485.246 billion miles. In 2012 average gas prices were $3.57, and eyeballing from Calculated Risk, VMT seems to be about 3 trillion miles.

Furthermore, 1950’s fuel economy is very hard to come by, but according to this textbook, average fuel economy for automobiles seems to have been around 13.9 mpg (which seems generous, but I’ll allow it!). Average fuel economy for automobiles in 2012 according to TrueCar was around 23.2.

Taking all of this into account, nominally, Americans spent $87.27 billion in gasoline in 1950, and $446.25 billion in 2012, an increase in spending of 400%, which is a wild increase in spending on gasoline. I have a feeling that Jim implicitly has this statistic in mind when he is thinking about gas prices…and it is the wrong statistic to focus on. What does this really tell us? Just that Americans are driving more, not at all whether we are spending more per mile driven. So how much are we paying per mile driven?

It turns out, in 1950, on average we paid 17.9 cents per mile driven, and in 2012, on average we paid 15.3 cents…and, for much of my life, has been drastically lower than it is today!

The real price of a mile traveled by automobile has, indeed, gone down since 1950. Also in 2012, VMT decreased for the first time since statistics started, a triumph in-and-of itself!

Now, this was really just a fun exercise (Krugman even made the same mistake glossing over the issue), the meat of the problem is whether “middle class” incomes have actually stagnated…but I think this question succumbs to many different issues…but the biggest issue in my mind is that “middle class” is not really a range of income. Indeed, according to Wilford King, the “middle class” was in decline in 1915…a full three decades before most economists consider the United States to have developed a “middle class”! Really, the term “middle class” refers to a bundle of consumption that differs greatly based on many different factors. I know that I’m middle class because I can outwardly see that my consumption patterns differ from people I can easily identify as “poor”, but are roughly consistent with people with whom I have good reason to believe are in my income class. I also can outwardly see that some people make a lot more money than I do. However, all of these are heuristics. And that isn’t even taking into account that I am 28. This is why such a wide swath of people consider themselves “middle class”, and always have. The term “middle class” certainly hides more than it illuminates.

P.S. Here is a handy tool to calculate your personal gas price per mile driven.

Update: My “drastically lower” link now points to the right chart.

2 thoughts on “What about Gasoline?

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