The 'Miles Per Gallon' Illusion
Consider the case of two car owners: One is looking to switch their SUV averaging 12 miles per gallon (MPG) to an SUV averaging 14. The other is looking to switch their compact car averaging 30 MPG to a newer model averaging 40. Both individuals drive 10,000 miles per year. Who of these two people would save the most gasoline and money?
Duke University Professors Richard P. Larrick and Jack B. Soll originally posed this scenario back in 2008 in an article published to the journal Science. To many people, the answer might seem obvious: the second individual would save the most, as they are boosting their MPG by 33% (vs. 16.7%) and will be able to travel 10 miles more per gallon (vs. just two). But this is completely wrong, and it just takes some quick math to figure out why.
Dividing 10,000 miles by 12 MPG, we find that the SUV owner currently uses 833 gallons of gasoline per year. Upgrading would reduce that number to 714 gallons, saving 119 gallons. Dividing 10,000 miles by 30 MPG, we learn that the compact car driver burns through 333 gallons per year. A more fuel efficient car would take that down to 250, saving only 83 gallons. For the SUV owner, a measly two miles per gallon makes a huge difference!
Larrick and Soll used this example to expose 'miles per gallon' as an "illusion" – a flawed measure of fuel efficiency. The duo also conducted three different surveys involving over 300 participants, each of which backed their hypothesis that MPG leads people people to underestimate the large fuel and cost savings of upgrading gas-guzzling cars.
A better option, they argued, is expressing fuel efficiency as "gallons per 100 miles" (GPM). Such a measure might seem strange to anyone accustomed to MPG, but Larrick and Soll demonstrated in one of their surveys that participants armed with this information were more likely to correctly gauge cost and fuel savings.
"Although MPG is useful for estimating the range of a car's gas tank, GPM allows consumers to understand exactly how much gas they are using on a given car trip or in a given year and, with additional information, how much carbon they are releasing. GPM also makes cost savings from reduced gas consumption easier to calculate," they wrote.
Since Larrick and Soll published their paper in 2008, the EPA updated their fuel economy label placed on new cars sold at dealerships to show GPM, albeit in small print.
As Nobel Prize-winning behavioral economist Daniel Kahneman noted in his book Thinking, Fast and Slow, "The five-year interval between the publication of 'The MPG Illusion' and the implementation of a partial correction is probably a speed record for a signification application of psychological science to public policy."