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August 2nd, 2008

sunk costs and SUVs

I whined about this in an earlier post, but I'm going to separate out this set of links because I went _looking_ for people who had the sense to discuss the sell-SUV-or-not decision with conscious awareness of the sunk costs fallacy. Amazingly enough, _even people who included the fallacy explicitly as a fallacy_ continued to make it.

Exhibit A:

http://www.articlesbase.com/suvs-articles/dont-trade-in-that-suv-yet-486619.html

So close! But then a really fucked up definition of what the sunk costs are in this situation, to essentially define away the relevant sunk cost. Really, what we're talking about here is letting trade-in-before-fuel-price-run-up vs trade-in-now drive a bad decision. And this person says that doesn't count as part of "sunk cost".

This blogger recognizes the error, but is still going to put off selling the SUV:

http://www.thoughtgadgets.com/2008/07/fallacy-of-sunk-costs-or-why-you-cant.html

This thread is amazing, in that it starts out with a _really brilliant decision_ that is then being questioned by the person describing it.

http://www.city-data.com/forum/automotive/358450-really-worth-trading-suv-small-car.html

Sure, it'll probably take 3.5 years or whatever for it to pay out to have made the swap. But if they'd _waited_ even a few weeks to sell their Expedition, it would have taken a helluva lot longer, because there's no way they'd have gotten as good a deal on their trade-in as they did. Poster shows no particular awareness of this (but that makes sense, actually). (The assumption about trading vehicles every 3.5 years is pretty aggressive these days anyway, IIRC.) There are some moronoic followups (scooters that apparently start at $4k, etc.), but in general, the level of discourse is surprisingly high.

Surprise!

Friday evening I went to Panera Bread expecting to hang out with friends and chat about what we've been reading. I brought a book, in case someone wanted to borrow it (_Nobody's Home_, previously reviewed here favorably). When I arrived, I ordered a salad and iced tea and found the group. There were piles of wrapped packages and gift bags, which made me go immediately, whoa. "Did I forget to bring a present for some occasion?", racking my hormonally challenged brain for a birthday or something that might have slipped my mind.

Nope. This was a surprise baby shower. For moi. Or A., who currently is a tenant of my belly and who I expect to move out in a little over a month. And when I say surprise, I do mean surprise. In a good way, but I had no clue. Lots of fun! Lots of loot. Pretty clothes and lovely toys. And, of course, a chance to talk about books and gossip with people I love dearly.

Obviously, I miss all my friends who live elsewhere (and the ones who were out of town locally and unable to come), but boy, we sure had a grand time. You'd have thought it was a bar, as much laughing and loud conversation that went by over the next three hours. J., current beloved _and_ reliable caretaker of T. to preserve my sanity and good humor, set it up and told R. that it would happen, but not when. Such a sweetie.

threshhold effects

The Board of Selectmen in my town has recently taken to discussing whether or not employees of the town (like the police chief) can drive vehicles of the town (like, the police chief's car) home. Police officers at various levels have often commuted in their official vehicle because they are "on call" and need to be able to respond quickly and/or have access to what is in their official vehicle (flashers, sirens, radios, etc.) quickly. The BOS is trying to save money on gas. Needless to say, there's been some contentious discussion, both at the BOS meetings, in the local papers, around town, etc.

There are a variety of ways to think about what the town might or might not allow and how it would be accounted for. For example, if the police chief couldn't drive the town vehicle home, but needed its contents to do his job, one could imagine supplying portable versions for his own vehicle. One could also imagine having to reimburse him if he has to use his personal vehicle in the course of doing his job. Depending on how that worked out, there might or might not be any meaningful savings on gas, and it seems very likely there'd be some amount of hit to the level of service provided to/by the town.

Of course, the town has had the policy of letting various employees of the town make this call for themselves, because the cost of fuel was such that, compared to other costs the town incurs, it wasn't really worth paying attention to. This year, apparently, it is worth paying attention to. Last year, apparently, it was not worth paying attention to. Elephants back to at least 1999 when the current policy was instituted. This further complicates accounting for possible savings. Do you figure you save all the cost of gas, the amount increase over a year ago, two years ago, n years ago...?

I realize I've about flagellated this deceased equine to death, but I decided my next car was going to be a Honda Fit when I was still in Seattle (so, some time before September 2006). I tried to sell my WRX so we wouldn't have to transport it back to NH, but was unable to unload it quickly enough (I am, therefore, sympathetic to people who keep lowering their price and not finding any takers). I ultimately sold the WRX about a year ago in July 2007, IIRC. Because it took me longer to buy it than I had intended, and I had intended to buy it because of the increasing cost of gas, I was, shall we say, kinda startled to run across this statement in a comments thread:

"Last year this time gas averaged $3. There was no ignorant hysteria or widespread mobbish rage. In fact, there was no dialogue at all about oil, energy." Just for reference purposes, the comment was dated July 11, 2008, and can be seen as comment #10 here:

http://www.naplesnews.com/news/2008/jul/10/long-lists-future-hybrid-owners-forced-wait-save-m/

But then I put the BOS/town discussion of possibly saving a buck or two by screwing our public servants together with this comment and realized, hey! That _is_ what the world looks like to a broad band of people. Just because I was out there buying Peak Oil books before moving back to Seattle (so now we're looking at before February 2005), and yammering on about conservation, and why Jimmy Carter and the sweater thing is so unfairly vilified and blah blah blah -- that doesn't mean everyone was paying attention. A lot of people were not. But they are now.

A perfect example of a threshhold effect.

ETA: Last week on the Colbert Report, Colbert had a guy from Slate on talking about Green decisions, specifically, paper vs. plastic for bags from the grocery store (also car a/c vs opening the windows and compact fluorescent light bulbs which have mercury in them). These are all entertaining little lifecycle analyses, and odds on, you probably know the answers to all of these, in much the same way that I was watching gas prices well over a year ago (altho I had not developed my current fanatical devotion to tracking the daily gyrations of WTI). It kinda made me laugh, tho, because several months ago, the Shaw's locally started selling those made-from-recycled-something-or-other bags for a $1 each and they've caught on quite strongly. This is in New Hampshire. Not California. Not Washington State. Not even Massachusetts.

ETA2: If in the course of reading following some of these links and reading the comments you get a little concerned about SUV owners and others who assert Priuses suffer from an unusual fire hazard, let me just share the following actual test by actual fire fighters of what would happen to an actual, unmodified Prius if the Prius were fully engulfed in fire (which can happen to _any_ kind of car, judging by what I'm finding through google).

http://cms.firehouse.com/content/article/printer.jsp?id=54882

No particular problems due to the battery pack, which melted some, but released nothing unusually nasty and was not itself involved in the fire.

If you decide to mess with your Prius to make it a plug-in involving Lithium-Ion batteries instead of the Ni-MH that it ships with as a hybrid, however, I should note that you might want to do a little testing before deployment. At least one person out there had some problems.

ETA3: Gotta love it when a blog at wired is advocating buying a mid 80s Chevette. Words fail me, so read it yourself at:

http://blog.wired.com/cars/2008/05/the-ultimate-pr.html

sunk costs vs. sustainability

Of course, the sunk costs argument is an economists argument -- not an environmentalists argument. There's some serious energy wrapped up in an old vehicle (see the tail end of the previous post) -- or an old building.

This is a discussion of stored costs, er, energy vs sunk costs, er, energy in vehicles, primarily:

http://blogs.nimblebrain.net/index.php/2008/07/27/reuse_versus_replacement?blog=5

Which links to an article about the same issues in buildings. There are some issues in this article:

http://www.preservationnation.org/magazine/2008/january-february/cautionary-tale.html

Notably, commercial buildings from before 1920 are (a) mostly gone and (b) there aren't many of them compared to commercial buildings as a whole and (c) they've probably been modded. Repeatedly. But the idea that any given building, residential or commercial, is essentially stored energy, is a fascinating one.

While a building (or vehicle) which is destroyed after you are done with it is over and done with (altho the demo and removal costs should be accounted for reasonably, as should salvage from same) is over and done with, a building (or vehicle) which you sell to someone else goes on to have a life of its own. A certain number of people out there worry about selling their guzzler because they know they aren't putting many miles on it per year and fear the next person might do worse. I'm not convinced that's justified; I distinctly recall running across people who replaced an 8 mpg truck with a 16 mpg truck (or SUV or whatever); presumably the 16 mpg vehicle was replaced by a 20+ mpg vehicle and so on upstream. I, for one, don't think we need worry too much about encouraging the production of replacement vehicles for these folk (the terrible to merely bad mpg vehicles); the used market should be able to supply them adequately for a long time to come.
Yeah, it's 9 pages long. But it's about hospitals deporting illegal immigrants who need round the clock nursing care. How do you get harder than that to solve?

http://www.nytimes.com/2008/08/03/us/03deport.html