The True Price of a Hybrid

[Borodog]

A firend of mine has a very interesting piece in The Freeman, a publication of FEE, the Foundation for Economic Education on the price system, using as an example environmental economics and the true price of hybrid vehicles.

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How do we measure the scarcity ratio between apples and oranges without a common denominator? In a barter economy with two goods, there is only one ratio that needs to be considered. In an economy with three goods, there are three ratios. With four goods, there are six ratios; and with five goods, there are ten ratios. In a complex economy like ours, there are too many ratios to count.
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However, in an economy that uses money, all we have to do is compare prices. They quickly show us the relative scarcities. If the price increases, the item is becoming scarcer. Not only does the price tell us if the item is becoming more or less scarce, it also tells us by how much. A 1 percent change is different than a doubling of the price. Since each item’s relative scarcity is expressed as a price, no one has to know all the relative scarcities of the various inputs unless he wants to look. In a world of barter, I would need to keep in my head the relative scarcity ratio between my toothbrush and magnesium. In a world of prices,we don’t have to know the price of magnesium unless we want to know. By simply looking at prices and comparing costs, entrepreneurs are able to calculate economic efficiency.

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Let’s look at the popular 2007 Honda Civic Sedan Hybrid and compare it to the nonhybrid version. The Civic Sedan’s average price is $17,760; the hybrid’s average price is $22,600, a $4,840 difference. Next we need to check the miles per gallon claimed for each car. The Civic Sedan gets 35 mpg, the hybrid 50 mpg. If the average person drives 15,000 miles per year, then the savings is 128.57 gallons a year, or $424.28 a year (assuming gasoline at $3.30 per gallon). Before we discount for the future, we see that it will take over 11 years to make buying the hybrid worthwhile. When we include a reasonable discount of 3 percent, the number grows to 14.5 years.

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It's a quick and easy read and very good to boot. <font color="white">Cue the bitching from people who haven't read the article in 5 . . . 4 . . . 3 . . . </font>

[Copernicus]

except that price change is not always attributable to change in scarcity

the hybrid cost analysis has been done to death

[qwnu]

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then the savings is 128.57 gallons a year, or $424.28 a year (assuming gasoline at $3.30 per gallon).

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This assumes the only benefit to buying a hybrid is financial.

In Arizona, some hybrids qualify to drive in the HOV lane even with no passengers. Many people with long freeway commutes are buying Priuses just for the glorious feeling of zipping down the HOV lane when the freeway is jammed (or so I've been told).

[Copernicus]

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then the savings is 128.57 gallons a year, or $424.28 a year (assuming gasoline at $3.30 per gallon).

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This assumes the only benefit to buying a hybrid is financial.

In Arizona, some hybrids qualify to drive in the HOV lane even with no passengers. Many people with long freeway commutes are buying Priuses just for the glorious feeling of zipping down the HOV lane when the freeway is jammed (or so I've been told).

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Then Az has it backwards. The gas guzzlers should get HOV rights so they dont it in traffic and burn that extra gas and contribute to global warming. Let the greenies open up their sunroofs and bask in the glory of nature.

[[Phill]]

No, the use of the lane is an incentive to switch to a hybrid.

And has been covered, no one ever buys hybrids based on cost analysis - plus many costs are hidden and in many ways cannot be broken down into dollar amounts such as environmental effects.

[BCPVP]

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No, the use of the lane is an incentive to switch to a hybrid.

And has been covered, no one ever buys hybrids based on cost analysis - plus many costs are hidden and in many ways cannot be broken down into dollar amounts such as environmental effects.

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I thought that hybrids usually have a larger carbon footprint than non-hybrids. So if it won't save you money and is more harmful to the environment, what is the reason to buy a hybrid?

[[Phill]]

Im not aware that it does have a larger carbon footprint - i can only assume this is because of the carbon cost of developing the technology? Do you have a link for that?

If it does have a larger carbon effect, and ignoring the other crap that cars pump out their exhausts, then ill happilly concede the Prius is marketed really well and my knowledge is lacking.

For the record most hybrids can be outdone for MPG and other environmental figures by small engine light cars and modern efficient turbo diesel engines and ive said for a long time their green friendly credentials are lacking - especially since the quoted figures are often gross overestimates based on selective testing environments.

I dont own a hybrid, never have, but like i said it isnt about cost and it seems it is about incorrect perception they are greener - although im sure a lot of it is a fashion statement/publicity and perception as being pro environment.

Either way, im sure they are miles better than SUVs across the board.

Which reminds me of a cribs episode where some minor celeb showed us round his house, then showed us the two SUVs, a Merc of some kind a Prius he said he rarely drove.

[BCPVP]

I've heard it mentioned elsewhere and this link supports the idea. Basically, the reason the carbon footprint is larger is because the specialized parts of hybrids often have to travel much further than conventional car parts.

[Zygote]

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plus many costs are hidden and in many ways cannot be broken down into dollar amounts such as environmental effects.

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price dilution/subsidization only occurs from government intervention. Whether its the fact that governments own the airspace, roads, courts/justice, etc. and distort the price of energy.

[DcifrThs]

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I've heard it mentioned elsewhere and this link supports the idea. Basically, the reason the carbon footprint is larger is because the specialized parts of hybrids often have to travel much further than conventional car parts.

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is the consumer driving of the prius vs. hummer taken into account in that calculation?

how many years must i drive the prius to make up for the mile energy cost differential?

Barron