People aren't dumb, just bad at judging actual cost

Tuesday, May 06, 2008

High gas prices driving small car sales

The trend proves again what we already knew - that people respond to events that hit their wallet, not their conscience.

High gas prices driving small car sales Shocker - with gas getting more and more expensive, people are buying more small cars. While I agree with the above-quoted statement, I think what it really gets at is that people are inherently rational. We just aren’t always good at judging value. It goes well beyond over-valuing brand new Lincoln Navigators with 22" chrome wheels and heated massage chairs while under-valuing small, efficient, reliable cars. Now, I know that I tend to over-value that feeling of smug self-satisfaction when I walk to work or take the bus home, laughing at the schmucks who drive two hours into Nowhereville, VA. But I also know that a lot of them over-value the sixth bedroom and second acre their house is on as they give up twenty hours a week commuting. Anyway, I hope GM an Ford can figure things out before the European and Japanese and Korean car manufacturers swoop in and totally wipe out the American manufacturers, who seem to have mortgaged their future on the mistaken idea that people would continue to buy high-profit SUVs forever. I hope that GM and Ford can quickly change with the gas prices, and perhaps bring some of the cars they make for overseas markets to the States as the demand changes. But I have to say I’m not that optimistic.

Posted in: driving , economics , Wind kissing