The Recession and the Decline in Driving

August 19th, 2011  |  Published in Data, Social Science, Statistical Graphics, Statistics

Jared Bernstein recently posted the graph of U.S. Vehicle Miles Traveled released by the Federal Highway Administration. Bernstein notes that normally, recessions and unemployment don’t affect our driving habits very much–until the recent recession, miles traveled just kept going up. That has changed in recent years, as VMT still hasn’t gotten back to the pre-recession peak. Bernstein:

What you see in the current period is a quite different—a massive decline in driving over the downturn with little uptick since. Again, both high unemployment and high [gas] prices are in play here, so there may be a bounce back out there once the economy gets back on track. But it bears watching—there may be a new behavioral response in play, with people’s driving habits a lot more responsive to these economic changes than they used to be.

Ok, but what’s the big deal? Well, I’ve generally been skeptical of arguments about “the new normal,” thinking that much of what we’re going through is cyclical, not structural, meaning things pretty much revert back to the old normal once we’re growing in earnest again. But it’s worth tracking signals like this that remind one that at some point, if it goes on long enough, cyclical morphs into structural.

Brad Plumer elaborates:

What could explain this cultural shift? Maybe more young people are worried about the price of gas or the environment. But—and this is just a theory—technology could play a role, too. Once upon a time, newly licensed teens would pile all their friends into their new car and drive around aimlessly. For young suburban Americans, it was practically a rite of passage. Nowadays, however, teens can socialize via Facebook or texting instead—in the Zipcar survey, more than half of all young adults said they’d rather chat online than drive to meet their friends.

But that’s all just speculation at this point. As Bernstein says, it’s still unclear whether the decline in driving is a structural change or just a cyclical shift that will disappear once (if) the U.S. economy starts growing again.

Is it really plausible to posit this kind of cultural shift, particularly given the evidence about the price elasticity of oil? As it happens, I did a bit of analysis on this point a couple of years ago. Back then, Nate Silver wrote a column in which he tried to use a regression model to address this question of whether the decline in driving was a response to economic factors or an indication of a cultural trend. Silver argued that economic factors–in his model, unemployment and gas prices–couldn’t completely explain the decline in driving. If true, that result would support the “cultural shift” argument against the “cyclical downturn” argument.

I wrote a series of posts in which I argued that with a more complete model–including wealth and the lagged effect of gas prices–the discrepancies in Silver’s model seemed to disappear. That suggests that we don’t need to hypothesize any cultural change to explain the decline in driving. You can go to those older posts for the gory methodological details; in this post, I’m just going to post an updated version of one of my old graphs:

Vehicle Miles Traveled: Actual and Regression Predictions

The blue line is the 12-month moving average of Vehicle Miles Travelled–the same thing Bernstein posted. The green and red lines are 12-month moving averages of predicted VMT from two different regression models–the Nate Silver model and my expanded model, as described in the earlier post I linked. The underlying models haven’t changed since my earlier version of this graph, except that I updated the data to include the most recent information, and switched to the 10-city Case Shiller average for my house price measure, rather than the OFHEO House Price Index that I was using before, but which seems to be an inferior measure.

The basic conclusion I draw here is the same as it was before: a complete set of economic covariates does a pretty good job of predicting miles traveled. In fact, even Nate Silver’s simple “gas prices and unemployment” model does fine for recent months, although it greatly overpredicts during the depths of the recession.* So I don’t see any cultural shift away from driving here–much as I would like to, since I personally hate to drive and I wish America wasn’t built around car ownership. Instead, the story seems to be that Americans, collectively, have experienced an unprecedented combination of lost wealth, lost income, and high gas prices. That’s consistent with graphs like these, which look a lot like the VMT graph.

The larger point here is that we can’t count on shifts in individual preferences to get us away from car culture. The entire built environment of the United States is designed around the car–sprawling suburbs, massive highways, meager public transit, and so on. A lot of people can’t afford to live in walkable, bikeable, or transit-accessible places even if they want to. Changing that is going to require a long-term change in government priorities, not just a cultural shift.


Below are the coefficients for my model. The data is here, and the code to generate the models and graph is here.

                Coef.     s.e.

(Intercept)    111.55     2.09 

unemp           -1.57     0.27 

gasprice        -0.08     0.01 

gasprice_lag12  -0.03     0.01 

date             0.01     0.00 

stocks           0.58     0.23 

housing          0.10     0.01 

monthAugust     17.52     1.01 

monthDecember   -9.21     1.02 

monthFebruary  -31.83     1.03 

monthJanuary   -22.90     1.02 

monthJuly       17.84     1.02 

monthJune       11.31     1.03 

monthMarch      -0.09     1.03 

monthMay        12.08     1.02 

monthNovember  -10.46     1.01 

monthOctober     5.82     1.01 

monthSeptember  -2.73     1.01 

---

n = 234, k = 18

residual sd = 3.16, R-Squared = 0.99

* That’s important, since you could otherwise argue that the housing variable in my model–which has seen an unprecedented drop in recent years–is actually proxying a cultural change. I doubt that for other reasons, though. If housing is removed from the model, it underpredicts VMT during the runup of the bubble, just as Silver’s model does. That suggests that there is some real wealth effect of house prices on driving.

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