The Great Car Reset

Are we moving beyond the auto age? Writing in Esquire, Nate Silver provides hard statistical evidence that America's once-overwhelming car-culture and driving habits have peaked. This article in Advertising Age (h/t: Patrick Adler) provides additional evidence that we may well be in the early stages of a reset in attitudes about driving and car ownership, especially among younger folks. Here are some key statistics from the article:

  • "In 1978, nearly half of 16-year-olds and three-quarters of 17-year-olds in the U.S. had their driver's licenses, according to Department of Transportation data. By 2008, the most recent year data was available, only 31 percent of 16-year-olds and 49 percent of 17-year-olds had licenses, with the decline accelerating rapidly since 1998."
  • "Twenty-somethings went from driving a disproportionate amount of the nation's highway miles in 1995 to under-indexing for driving in 2009."
  • "It's not just new drivers driving less. The share of automobile miles driven by people ages 21 to 30 in the U.S. fell to 13.7 percent in 2009 from 18.3 percent in 2001 and 20.8 percent in 1995."

Source: Advertising Age

While "the environment" is the reason many young people cite for driving less and not wanting to own a car, there are several other key forces at work, according to the article:

  • Alternatives to car ownership such as Zip Car or other auto-sharing services.
  • Greater use of alternative modes of mass transit to and from work. This can save money and boost productivity. You can focus on getting work done on the train, something you can't do in a car.
  • New ways of working from free agency to more flexible schedules and telecommuting which further reduce the need for cars.
  • The rise of the Internet and e-commerce as an alternative to shopping. You no longer need a car to get everything from groceries and personal products to books, CDs, and electronic goods.
  • Trading-off car ownership to free up cash for other uses from travel, entertainment, technology, and experiences to more savings.
  • The increased popularity of close-in locations and walkable mixed-used neighborhoods which further reduces the need for a car to get around.
  • A gradually changing economic landscape which advantages larger and denser regions with more transit alternatives - from walking and biking to mass transit (similar to what I described in an earlier Atlantic piece).  As the article notes:

"The real-estate markets most profoundly affected by the bursting housing bubble -- such as Las Vegas and other Sunbelt metro areas -- are boom towns built around highways with no substantial train transportation. Real-estate markets that have been less affected or quicker to recover include Boston and San Francisco, which have strong urban rail systems. In New Jersey, Connecticut, Boston, Denver and Chicago, housing prices near new or existing train stations have either been among the first to recover or have seen less depreciation during the bursting of the housing bubble."

Source: Advertising Age

Younger people today -- in fact, people of all ages -- no longer see the car as a necessary expense or a source of personal freedom. In fact, it is increasingly just the opposite: not owning a car and not owning a house are seen by more and more as a path to greater flexibility, choice, and personal autonomy.

Underlying all of this is not so much a shift in "car culture" values but a shift in economic realities. Owning a car and a house are very costly, for individuals and the economy as a whole. What distinguished "savers" from "spenders," according to a Canadian study (.pdf), is outlays for housing and especially for cars. The amount of money the average American family spends on housing and cars went from 22 percent in 1950 to 44 percent by the 1980s to more than half today. It's not so much that America is a society of wanton over-consumers -- though some surely fit that bill -- it's that they've been trapped by the housing-car-energy complex that once stood at the very heart of the U.S. "Fordist" economy. And as any number of studies have shown (.pdf), America's over-investment in housing has badly distorted its economy.

We can't recover by breathing life back into that old economy. Lasting prosperity requires investment in a new and more efficient economic system. We'll never get there if we continue to spend every last penny on houses, cars, and energy. We need to reduce spending on the old Fordist consumption bundle in order to free up capital for new technologies, new industries, and greater skill and personal development broadly.

Some of that is already happening as people downsize their homes, downshift consumption, and trade train rides or walkable neighborhoods for long suburban commutes. Young people are at the cutting edge of these shifts, as they are just starting up in their jobs and careers; choosing places to live, work, and raise their families; and deciding how they want to live their lives. Great Resets like this are generational events. They do not spring forth overnight but emerge gradually over time as millions upon millions of individuals and families reset themselves in light of new economic realities. We remain in the very earliest stage of the current reset.

While some look at rebounding car sales or an uptick in the housing market as a sign of economic recovery, from where I sit, the shift away from driving and cars among young people is a much better indicator that the economy is starting to head in the right direction.