How Hybrid Cars Make Our Country Poorer

If the only reason that you use a hybrid car is because of the government subsidy, it is likely that hybrids are making the country poorer. The analysis is no different that for farm subsidies or protecting jobs in the steel industry. In this case, the example below implies that the social loss is $1,271 per car. You want to save gas? Well, the price of the gas already incorporates all the opportunity costs and gives you the right incentive to economize. There are obviously many ways to economize and you weigh those costs against the gains from not having to buy as much gasoline. Worried about the fact that Iran may stop delivery? Well, that risk is already in the price of gas. If Iran were to stop deliveries, the price would rise to some amount. Traders will raise the current price to that expected price. If they didn't, someone could make some money. The point in referencing the example below is that if the cost of gasoline paid for the additional cost of the hybrid vehicle, you wouldn't need a subsidy. That additional cost of buying something that doesn't pay for itself is a loss to the country. Let the Europeans or others adopt these environmental rules. They will pay the cost and we will get a slightly lower price for gas (the effects hardly seem large given that we live in a world market for gas).


The incentives of purchasing a hybrid car could be philosophical, financial or environmental. Berman recognizes that not everyone is willing to go completely green right away.

"Everyone should take little steps," Berman told LiveScience. "Buy the most efficient fuel car. It doesn't have to be hybrid. If you don't need an SUV, don't get an SUV."

Some car buyers might want to look at the decision from a purely financial standpoint.

Here is an example of how one choice might work out:

The average American drives 15,000 miles each year, with 45 percent of that on highways. The traditional Honda Civic costs about $17,110, and it gets about 30 miles per gallon in the city and 40 highway. At $2.92 a gallon, this subcompact car costs $1,296 in gasoline in one year.

At $22,900, the Honda Civic Hybrid will initially cost a bit more, but with an average of 50 miles per gallon, a year of gas will cost $878.

In 10 years, taking into account inflation at 3 percent but not factoring in any possible changes in gas prices, the gas savings of a hybrid reaches almost $5,000.

Finally, a new federal incentive program allows you to receive a one-time $2,100 tax credit for buying a hybrid.

Tally up all the extra costs and factor in the savings — not counting additional incentives offered by some states — after 10 years, this hybrid will ultimately save you about $1,229. . . . .


Anonymous Anonymous said...

There may also be more hidden costs to owning a hybrid, especially as it ages. A hybrid has more mechanical parts which increase it's complexity which increases it's cost to maintain and repair.

5/12/2006 5:30 AM  
Blogger John Lott said...

Thanks. There are surey other costs in disposing of and replacing batteries.

5/12/2006 7:45 AM  
Anonymous Anonymous said...

It should also be noted that hybrid cars have much poorer mileage on highway driving than in town. 50 mpg is an optimistic number and 45% highway driving is overly conservative. It may be 45% in terms of time on the road, but not in miles. If someone really wants to get 50mpg, they should look at the VW diesels.

5/16/2006 1:17 PM  
Anonymous Anonymous said...

Hybrids are definitely "city cars" that outperform gas-only cars in start-and-stop traffic. That theoretical situation used to calculate the cost of driving has not existed for people in the city of Los Angeles, working a regular 9-5 (or 8-5) job, for a while. The freeway system is a start-and-stop environment during the workday, to a few miles east of downtown. Not surprisingly, hybrids have been pretty popular in the city. The best intentioned enviro-granola-eater soon tallies the hundreds of dollars they save at the pump. (The reason for surprise is simple: they didn't realize that they were getting lousy mileage from their previous car.)

Also, the idea that a hybrid will be harder to repair is unfounded. The current ones, with a transmission, will be harder, but if you get rid of the trans and create a simple system with motors, batteries, and a generator, you eliminate complexity and increase modularity.

The system to eliminate next is the batteries. Right now, they store enough energy to go a hundred miles. That seems somewhat pointless. They should strive to reduce that range to 25 miles, and run the generator a lot more, and get better mileage because the car weighs less. Also, you want batteries that act more like capacitors, and discharge a lot of power quickly.

There are a lot of other avenues that hybrids open up. You can optimize the engine because it no longer needs to operate in a wide range of speeds, nor needs to be so large. You can run it very hot and waste little fuel.

Hybrids are doing for cars what microwave ovens did for cooking. Yes, microwaves are not as cool and macho as barbecueing, but, microwave ovens reduced energy use, sped up food preparation, reduced the practice of boiling food, and probably are healthier.

All you naysayers can continue to dismiss the hybrids. You can also continue to boil your water on the gas range.

5/31/2006 11:25 PM  
Blogger John Lott said...

Dear last anonymous:

If these cars are as efficient as you claim, no regulations and cross subsidies forcing their adoption would be necessary. The fact that this has to be the case, indicates that these cars are making us poorer.

6/01/2006 12:10 AM  

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