Not long until the SUV is Australia’s most popular vehicle

The SUV is rapidly becoming Australia’s favourite kind of car. In every state, SUV sales look set to outstrip sales of passenger vehicles soon, if they have not done so already.

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Congratulations NT, the only state where more SUVS are now sold than passenger vehicles.Screen Shot 2014-12-16 at 9.40.46 am Screen Shot 2014-12-16 at 9.40.18 am

The Toyota Hilux, Mistubishi Triton, Ford Ranger and Hyundai i35 are among the top selling SUVs.

SUVs are great. They’re safer for drivers, they give you a better view, they can mount any terrain, and they have lots of boot space. But they come with costs. More vulnerable road users get hurt. And we can see those costs across the whole country.

The results for non-drivers are substantially more mixed than the results for drivers, which show clear falls. Some of the states with the biggest proportional increase in SUVs (especially Tasmania) show the worst results for pedestrians and motorcylists..

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For comparison, here’s the rate of change in driver deaths. It’s worth noting that Tasmania’s population has been pretty stable in this time while WA has grown.

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These “hatchbacks on stilts” are a game theory problem. If everyone else has one, we want one too, to be able to feel safe and to see what’s happening on the road. They come with clear externalities. There is a case for the government to intervene. 

“Hatchbacks on stilts.” Why SUVs are an arms race we must stop

There’s a lot of talk about how Australians are buying smaller cars, and how Australian car makers are stupid for pushing on with big petrol-guzzling cars nobody wants.

But Australians do want big petrol guzzling cars. They just want them to be tall.

The SUV category is going crazy. In April 2004, 12,351 SUVs were sold. By April 2014 monthly sales had doubled to 25350.

Meanwhile, “passenger vehicles” – your classic sedan, sold fewer. April 2004 saw 44,000 sold, but by April 2014 sales shrank to 39,000.

In 2014, even as the car market is having its worst year for a decade, SUV sales are creeping up.


When people buy an SUV, they’re purchasing the ability to go off road. Right?

Not if you look at the details. Companies are pushing out two wheel drive versions of their SUVs and they sell fast.

The AFR’s motoring writer nailed this in a review of the new $90,000 BMW, which is two-wheel drive.

Some surprisingly large SUVs – including the X6 fastback from BMW – feel like hatchbacks on stilts,” he wrote.

Reflecting: a BMW SUV in its element.

And there’s the key.

People want to be high up. It’s game theory. If the car in front of me is small, I can see over it really well from an SUV. If the car in front of me is tall, I want to be in an SUV or I won’t see anything at all.

Externality would be a sweet name for the new Ford SUV. I imagine its prestige to come from being that little bit bigger, heavier and harder to stop than the Explorer, the Excursion and the Expedition.

As someone who drives a car that comes up to armpit height, I can confirm sitting in traffic involves looking at a lot of SUV bumper bars and having no idea what is happening in the traffic up the road.

2048. Thank me later.

An elevated position doesn’t just permit a better view of traffic, but of other people in the traffic. I can’t see what that Range Rover driver is texting from down here, but they can sure see what’s on my phone (at right).

The light commercial category also shows the change. You can’t easily sell a ute you have to step down into these days. The 1.74 metre tall Nissan Navarra tops the category, easily out-selling the 1.5 metre tall Holden ute.

Buying a tall car is what’s called a dominant strategy, if you want to be able to see. It’s also a dominant strategy if you want to crash into another SUV, according to research.

In head-on collisions between passenger cars and SUVs … Drivers of passenger cars were more than four times more likely to die even if the passenger car had a better crash rating than the SUV.”

This is the classic game theory scenario of an arms race.

The arms race analogy is a good one. Like the proliferation of weapons, taller cars are costly and risky. They are heavier, take up more road space, cause more wear and tear to roads and emit more carbon. They may be more likely to roll in a crash. They’re exactly the kind of purchase decision in which a government might try to intervene.

For a long time, SUVS had lower import tariffs than passenger cars. That changed in 2010 when tariffs on cars fell. But by then, the proportion of SUVs sold was already steadily marching upwards.

Changes to the way we tax cars are possible in the next few years. The Henry Review recommends getting rid of the luxury car tax and fuel taxes, replacing them with congestion taxes or user pay systems. It is clear that our current system does little to deter SUV purchase. Could a well-designed licensing and user-pays system be better, or is the only stable game theory equilibrium one where we all drive cars like the Dodge Ram, that can barely fit in a lane?




Ethical economics: the externalities of eating meat.

Australians get through a lot of meat. The ABS released its meat and livestock series this week, and it caught my eye. Every month we kill and eat (or export) this many of the following animals:


I’m an ex-vegetarian.

A pork belly sandwich with which I crossed paths recently…

So this is not a diatribe or an attempt to persuade you to stop eating meat. It’s an attempt to persuade you that economics provides ways of thinking about issues beyond what you may expect.

Meat-eating can be considered as an economic issue. There are externalities to take into account.

CO2 emissions is one (agriculture is omitted from our carbon tax). But another is the ethical issue of killing. That might not seem like an externality – it’s central to the process – but it is external to the market. There is no price mechanism that accounts for the slaughter of the animal.

If we model that as an externality, there are important differences in the number of kills per mouthful of meat.

Here’s the monthly tonnage the industry produces.


The result of that is that every meal represents a different amount of the externality in question.


This is important information. If we aim for a buddhist ideal of minimising killing, perhaps we ought to eat only very large animals?

But deaths are not equal. Even fervent vegans would place more ethical and emotional weight on the death of an elephant than a fly (I think).

What happens if we weight these creatures by their brain size?

Cow 450g
Pig 180g
Sheep 140g
Chicken 4g
(Humans, for reference, have brains weight around 1.4kg.)

In this case, the chicken races up the league table to be a relatively ethical choice. The sheep, with a modest body size for its biggish brain, becomes the least ethical choice.


Of course brain size is not the only measure of intelligence. (And intelligence remains a highly disputable way to measure the possible ethical externalities of killing animals.)

If you are interested in reading a bit more about animal intelligence, I found this article particularly amazing.


Last night I saw Bruce Springsteen and the E-Street band play at an arena just a few kilometres from my house. He was supported by another great 80’s band, Hunters and Collectors, and the whole thing was worth many times the ticket price.

Bruce played for 3 hours 48 minutes, just short of his 4 hour 6 minute record. It was quality, not just quantity, but of course my mind still sometimes strayed into thinking about the economics of what I was experiencing.

Springsteen at AAMI Park, Melbourne, 16 February 2014.

1. Externalities.

Watching the Boss in a crowd of one would be lonely and weird. You need all those other people to sing along, chant, create energy..

While most people in the crowd provide atmosphere, there’s a certain subset of the crowd that is pure negative externality:

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Yeah, you guessed right. I’m not very tall. Still, I think tall people disproportionately enjoy live music and show up in disproportionate numbers. Could you create a simple market for live music that lets the short buy themselves a decent view?

2. Enforcement in the absence of clearly defined property rights.

Before the start, we were about six metres back from the fence in the general admission area. People guarded their space jealously. There were tiny pockets of space into which people from the back would push. The only way they could get away with it was by affecting the face of someone looking for someone, and loudly saying, “he said he was right here,” then looking at their phone. That created enough uncertainty to buy them time.

But if people – especially tall people – just muscled through and stood, it was another matter. There were two guys who looked like US professional wrestlers who stood right in my view, and this guy who looked like a retired orthopaedic surgeon tapped them on the shoulder and gestured violently that they better not stand there. It was beautiful.

3. Complements.

For some people, beer and music go so well together that they are willing to forfeit watching great chunks of an act they have paid $128 to go and see. They’d rather push through a darkened and tightly packed crowd, stand in a beer line and then carry beer back through – a mission of 20 minutes a time. Amazing. Perhaps this is actually a lesson in how some people don’t understand opportunity cost.

4. Diminishing marginal returns.

Bruce and the E-Street band played for over an hour before announcing they would play their 1975 hit album Born to Run from cover to cover. They played it. Then they played for another hour or so. That was when I first saw someone leave. Then the band left the stage, came back to start an encore, played a few songs, announced there was now just twenty minutes left, played a few more songs to use up that 20 minutes, played a super-long version of crowd-pleaser Dancing in the Dark, played traditional ending song Twist and Shout, did a huge finale, bowed and accepted the applause of the crowd. More of the crowd left to beat the rush. The entire E-Street band left the stage and just as Bruce was walking back past the drum kit, a roadie’s hand reached out with an acoustic guitar, he strapped it on and gave us one more song. Parts of the crowd audibly groaned. (Not me.)

The full setlist can be seen here.

5. For some people, a retirement age is a terrible idea.

Bruce is 65. He doesn’t look ready to start drawing down his super.

How to think clearly about skyscraper proposals.

A new 50 storey building is being planned at Melbourne’s highest point, next to a park called Flagstaff Gardens in the centre city. Continue reading How to think clearly about skyscraper proposals.