Gas Price Self-Deception

Here we are in the middle of the Independence Day weekend. AAA expects a record number to spend time away from home, an estimated 49 million people traveling in total. “That’s up 4.1 percent – 1.9 million people – compared to last year. This will mark the sixth consecutive year of travel growth for the holiday.” This source says “you’re better off staying home,” but that’s unlikely to change anyone’s mind.

Of all those travelers, more than 41 million will be driving, “likely thanks in part to lower gas prices,” which AAA expected to be 19 cents lower than last year.

The estimate of 19 cents was posted on June 27. A week later the new number was lower. “U.S. gas prices are creeping higher this week, owing to an extended rally in global oil markets and a weaker dollar, but drivers are still set to pay some 15 cents less per gallon over the July Fourth holiday and the weekend that follows, adding more than $100 million in extra spending power to the consumer economy.”

This is something I can never make sense of. A few pennies per gallon and people are ready to adjust vacation plans. Consider first the estimate cited above of $100 million available for other spending. That’s a lot of money. But wait! That amount divided by the 41 million people filling up their cars (or riding in them) is $2.44 per person. That is not a lot of money. Even if the difference had stayed at 19 cents and the savings jumped to $3.10 per person, that is still not a lot of money. Yet people make these kinds of decisions all the time without doing the math.

(Also, if an AAA estimate can be off by over 20% in less than a week, consider how little faith to put in other, similar estimates, even when they are made by people who study the subject all the time.)

But back to the subject of gas prices and on a related note, we find that Illinois residents who live near the border are going out of state to refill their gas tanks after the state doubled the gas tax, raising it (coincidentally) by 19 cents per gallon.

The July 1 issue of the Chicago Sun-Times leads with: “Illinois Drivers Head Over The Border To Find Cheaper Gas On First Day Of New State Gas Tax.” Gas stations just across the border are seeing a surge in business as “some Illinois drivers are frustrated, fed up and willing to make the trip to save some money.” They are almost in the same boat as the vacationers except the decisions they are making are long-term, so calculations are even more important.

The newspaper interviewed various residents traveling to Hammond, IN for gas. In one example a man said, “Takes me 20 minutes to come over here” to fill the tank. That could easily burn half a tank of gas. Burn half a gallon of gas each way at $2.75 per gallon to save on 19 cents for 12 or 15 gallons? (19 x 15 = $2.85) After the round trip the savings comes to about one dime!

Another case looks more favorable. “He makes the trek from Pilsen,” near Chicago, which is also about 20 miles away, but he buys more than gas. “We go to the big box store” and “are able to get more groceries for the family.” Now it becomes a destination for other shopping, not just a round trip, and the Indiana sales tax is 3% lower than the tax in Chicago. This makes a little more sense.

One other consideration, though, is the value of your time. Some insist it should be worth a minimum of $15 per hour to any employer. Should it be worth less to you? Is spending an extra 20 minutes an investment of another $5 or do people consider it free time? 

Critical thinking leads to some interesting questions and often some different conclusions.

Living Longer – The Secret To A Long Life

Everyone wants to know the secret to living longer, and many, many answers to that question are tossed around in the news media and on social media every day.  This is an important issue to most Americans. It is a matter for critical thinking, making sure the proposals pass the test of common sense, for perspective, making sure the potential gain is worth the investment, for economic understanding, knowing that a dollar spent on this pursuit cannot be spent elsewhere, and for discipline, having the ability to stick to a plan for the long term. (Note: any secret to longevity that has no long-term component doesn’t pass the critical thinking test.)

The next three or four installments of this page will cover an investigation of a few of these secrets to longevity. So where shall we start – how about with taking more vacations?

A news article about a study in Finland that, curiously enough, got to Yahoo News by way of India, tells us that men who take vacations live longer. Specifically, “compared with those who took more than three weeks, men who took three weeks or less annual leave from their regular work schedule were found to be 37 per cent more likely to die early.”

The study included 1,222 middle-aged executives, who were randomly assigned to a test group or a control group. Every four months they gave the test group advice on healthy living, including subjects like diet, exercise and not smoking. The control group was left alone. “Shorter vacations were associated with excess deaths in the [test] group,” but made no difference in the control group. They concluded: “stress reduction is an essential part of programmes aimed at reducing the risk of cardiovascular diseases.” 

Wow, where do I start? To be fair, I couldn’t find a link to the paper presented, so have no idea about how long the study lasted – hopefully, it was more than a few years, or how they defined excess deaths. But there are other flaws in the reasoning.

First, the sample was a decent size, but they cut it in half for no apparent reason. They assigned men randomly to each group. Randomization is a good course of action when you have no idea about the background of the subjects, but with more information it is preferable to assign similar people to each group to try to balance out what researchers call confounding factors. Some of those factors may have been family or work situations that could make taking vacation more stressful or impossible, such as divorce or personal/corporate bankruptcy. So randomizing into two groups is puzzling.

Then I wonder if vacation time was the only variable they tested for – that would seem odd given that they also provided healthy living information to only one group. Otherwise they may have been testing for a number of variables and found an “association” only with vacations. I have written elsewhere about how this practice can lead to some unreliable, even crazy results.

And who funded the study? Was it the Finnish tourism industry?

 Finally, the conclusions they reached cannot be applied to any large population – of Finland or anywhere else. They tested only male executives. It is comparable to a college professor testing a group of undergraduates, called a sample of convenience, and publishing the results as if they applied to ordinary citizens across the country. No can do! Do male Finnish executives have anything in common with female Detroit autoworkers? In fact, the conclusions did not even apply to their own so-called control group. How does not receiving healthy living information affect how stress-reducing a vacation is? Half their experiment backed their findings and the other half didn't!

I’m sure it made the news because everyone would like to exercise a little confirmation bias and latch on to a scientific study telling them what they want to hear: that not taking a three-week vacation can be a health hazard. Unfortunately, it’s not that simple.

So, if we want to live longer, we must look elsewhere, like to those magic pills, foods or beverages packed with vitamins and minerals – right? Not so fast! A word or two about that next time.

This and That

Critical thinking leads to some interesting questions and observations.

A friend recently asked me why he has to pay for syringes for his wife’s diabetes injections while drug addicts on the street can get them for free, funded by taxpayers like him.

How can people plan to pay for their children’s education or their own retirement when they can’t even plan for an annual vacation?  “According to a survey by financial planning company LearnVest, 74 percent of Americans have taken on debt to go on vacation.  The study surveyed 1,000 adults. It showed that, on average, Americans take on about $1,100 in debt for each vacation.”

The article adds:  “Around 55 percent of Americans forget to plan ahead for vacations when setting their budget for the year, according to the survey. It also shows that one-third of Americans would rather save money for a vacation than for a house or retirement.”  (See my earlier comments on vacation planning and gasoline price.)

People are puzzling about the drastic increase in overweight pets.  An analysis from veterinary clinics across the country of about 2.5 million dogs and 500,000 cats treated last year found an increase of more than 150% in overweight dogs and cats over the last 10 years.  About 1 in 3 are either overweight or obese.  The only surprise here is that they are still doing better than their owners.  (Can I say owners or do I have to call them pet parents for fear of offending someone?)

What is the city council of Minneapolis thinking?  They want to “require stores to charge a fee for any type of bag — paper or plastic — they give out.”  Can’t they see that this will hurt the poor the most?  Don’t they know that more people know about recycling than know that cloth grocery bags should be washed out periodically to avoid cross-contamination?

Two studies, one from University of Washington and the other the University of California, Berkeley, about the effects of the first tier of minimum wage increases in Seattle came to different conclusions.  One says it hurts the workers; the other says the workers benefit.  But Forbes reports there are “potential problems with both studies.”  The jury is still out and many economists do agree that the potential success or failure will be influenced by factors unique to the Seattle economy.  This is why it’s so important to conduct most of these experiments on the state and local level, rather than trying to impose a one-size-fits-all solution from Washington, then wring our hands as flaws later appear.

Here is a link to an informative table.  It shows murder rates by state by year from 2001 to 2015 with highlights showing which states had the death penalty (also by year).  It appears that the death penalty has no effect at all on the murder rates, even looking at data from individual states that banned it during that time period.  But some persist in defending capital punishment despite the fact that besides apparently not deterring crime, those cases are many times more costly than comparable cases.

Also interesting is that, despite what we might hear on the news or from politicians, the overall murder rate in America is half of what it was in 1980.

It’s a strange world we live in.  We all must be critical thinkers and question rather than passively accept any idea just because it sounds good.

Gas Prices in the News

First let’s check a few gas price projections for accuracy and then think about the real impact of those relatively small changes that so often make the news.

I happened upon this report about gas prices for the Washington, DC area – “AAA: Gas prices projected to rise this summer.”  This report was dated April 2, and they were saying, “AAA Mid-Atlantic estimates that prices at the pump this summer could rise 40 cents or more per gallon.”  The spokesperson from AAA gave a number of reasons for the prediction and concluded:  “We may be looking at $2.60, $2.65, $2.70 by Memorial Day.”  He added that by the Fourth of July $2.80 was possible, but $3.00 was unlikely.

Fast forward to the first day of summer.  This comes from the AAA website showing gasprices for Washington, DC:  Current average price = $2.479.  Average for the last month was $2.537.  It came close, but never hit $2.60, not to mention the $2.70 by Memorial Day.  But those headlines can sure get your attention!

Now on July 3, the AAA site for Washington, DC lists the current average price at $2.46.  What happened to $2.80?

Don’t blame the AAA.  One of my economics teachers used to say, “If you could accurately predict interest rates, you would never have to work another day in your life.”  The same can be said about gas prices.

Meanwhile, the headline from a June 13 issue of Time-Money article reads:  “Gas Prices Are at Historic Lows. Take Advantage With One of These Inspiring Road Trips.”  They point out:  “According to AAA, the average price for a gallon of regular gasoline is $2.33 nationally. That's about 5 cents cheaper than this time last year.”  Because the price is below last year and the lowest since 2005, they recommend a number of road trip options.

How is five cents per gallon enough to justify a road trip?  At that difference a road tripper would be saving $5 for every 100 gallons of gasoline purchased.  With an average efficiency for a small SUV of about 20 MPG, 100 gallons would take you 2000 miles.  Without stopping to see many sights the trip would take at least 4 days.  A $5 savings isn’t exactly going to last very long?

The same article lists other states with more significant predicted price drops of 13 cents to 25 cents in Ohio, Michigan, Kentucky, Indiana, and Illinois, but that’s still only about three to five times the miniscule average savings, and to enjoy that savings you must limit your 2000-mile trip to the Midwest.  (Note:  Effective July 1, Indiana raised the gas tax by 10 cents.)

This is not intended to poop anyone’s summer party plans or put a damper on a fun family road trip.  But do it only if you can afford it without counting on a few cents of savings at the pump.

According to some polls, about 40% will skip the summer vacation because they can’t afford it (the smart ones), while about 20% of those taking vacation will go into debt to do so.  You certainly can’t depend on the price drop at the pump to finance it.  And remember, those predictions are not exactly reliable in the first place.

Guns and Sunscreen

Summer is coming.  Traditionally this is a time for vacation and for visiting the beach.  But even these activities require a little thought, a little critical thinking to avoid the consequences of poor behavioral choices.

Critical thinking about vacation means more than just planning the itinerary.  A recent news headline read:  “TSA Hits New Record After Confiscating 73 Guns In One Week From Carry-on Bags.”  Wow, guns are not allowed on an airplane?  These are not terrorists, just travelers.  Apparently people either forgot or were distracted or didn’t check their bags themselves before leaving for the airport.  Not only were they confiscated but the TSA carry-on screeners found that 68 of them were loaded and more than two dozen had a round in the chamber.  People inadvertently trying to take loaded weapons onto an airplane is crazy, but not in a funny way.  If they were surprised to find out there was a gun in their luggage, they were probably more surprised to be facing a citation of up to $11,000 or in some cases even being arrested, regardless of their intent or degree of inattention.  All that lack of thinking can put a really damper on that highly anticipated and well deserved vacation.

Besides flying, another activity associated with summer (but often throughout the year) is getting a nice, healthy-looking tan.  To those who are so inclined this news will come as an unpleasant surprise.  The Federal Trade Commission (FTC) has permanently banned an Illinois company from marketing or selling indoor tanning systems.  These systems, the term tanning systems sounds more modern and scientific than tanning beds, were intended for home use and ranged in price from $1200 to $4000.  The FTC objection is that the marketers “ran ads claiming that their indoor tanning systems are safe, that research proves indoor tanning does not increase the risk of melanoma skin cancer, and that their systems which deliver both ultraviolet (UV) light and red light can ‘reverse the appearance of aging.’” The FTC labeled these claims as “false, misleading, or unsubstantiated.”  The company “also falsely stated that the U.S. Food and Drug Administration has endorsed the use of indoor tanning systems as safe.”

It takes about 30 seconds of Internet research to find the facts.  American Academy of Dermatology website states, “Evidence from multiple studies has shown that exposure to UV radiation from indoor tanning devices is associated with an increased risk of melanoma and non-melanoma skin cancer, including squamous cell carcinoma and basal cell carcinoma." [They include 9 citations in footnotes to back up this statement].

Several other sources tell us the following: 

• ·      Researchers estimate that indoor tanning may cause upwards of 400,000 cases of skin cancer in the U.S. each year.  That’s more than smoking.
• ·      There is no such thing as a safe tan and the beds may be more dangerous than the sun. 
• ·      Tanning can cause permanent structural damage to the skin, including wrinkling, age spots, and loss of elasticity, not make the skin younger.
• ·      A base tan does not protect skin from damage. In fact, people who base tan are more likely to report getting sunburned, perhaps from overconfidence.
• ·      Some who become addicted to tanning also are more likely to suffer from anxiety or mood problems.
• ·      Indoor tanning has been banned by a number of countries.

Surprise, surprise!  Even a simple thing like a summer vacation requires a modicum of critical thinking.  One of these errors will have immediate consequences and the other will have a delayed effect.  In any case, check the carry-on.  Pack the sunscreen and unpack the revolver. 

My Choice, Your Treat

I often see news articles that reflect the kind of thinking in the title.  Some people want to get their own way – make a decision, but want others to pay for it.  They argue vehemently that they only want it because it is fair or the right thing to do, but they aren't willing to take on the financial burden.  In many cases they seem oblivious to the fact that finances are involved.

Take the case of the Girl Scout camps mentioned in this recent article.  When the Iowa Girl Scout councils reviewed their budget and proposed selling their four remaining summer camps, one mother started a petition to fight the idea.  “Other scouting alums and volunteers have taken up the cause, too, packing public meetings, sending letters to newspapers and recording a protest song for YouTube. When those efforts failed, they filed a lawsuit.”  The fight is not limited to Iowa.  It’s a nationwide battle between the leaders who say that girls are less interested in camping and the protesters who “insist the camping experience shaped who they are and must be preserved for future generations.” 

“Pro-camp activists have boycotted cookie drives, held overnight camp-ins outside council offices, filed legal actions and tried to elect sympathetic volunteers to governing boards.”  This is a budget issue, but I don’t see any mention of those with strong feelings offering to dig deep into their own pockets or to start a campaign to raise funds for a cause they feel is so important.  Instead they petition, write letters, protest and boycott.  It’s a common case of wanting one's wishes fulfilled, but expecting the money to come from somewhere else.

On somewhat a related subject an article last week bemoaned the fact that the US is the only rich country that does not mandate paid vacation and/or holidays for all workers.  They show charts and tell how awful it is and how behind the rest of the world we are.  Again the argument centers on doing the right thing with someone else's money.

No one should expect to get paid for not working.  That pay is part of a compensation package earned during working hours.  Wages for holidays and vacations are ultimately paid by customers when they receive a product or service.  What if you went to the bakery to pick up your Saturday morning bagels and were told that the baker was on vacation but you were expected to pay anyway?  What if instead you were told that the baker had retired and that you were expected to pay every Saturday for the next 30 years but not get any bagels?  It sounds crazy, but some people think about vacation, holiday, sick leave, disability, FMLA and pension so narrowly that it’s as if they believe the world really works that way.  Of course, it doesn't.  Despite the name, "paid time off" is another form of pay for work done.  It’s nice to feel strongly about paid time off, but the solution is not that easy.  If the government forces companies to pay for time off, either the current compensation must be divided differently or the customers must pay more.   There is no magic money tree or mystery philanthropist to cover the cost.  Passing the costs to the customer, in a sense paying for each other’s vacation time, leaves us right back where we started.