Stick Shift or Automatic: Subjective Preferences
Back in 1976—it was another world, wasn’t it?—I purchased a Ford Granada in California. I remember the salesman confidently asserting, as if he had a serious theory to back up his opinion, that all cars would soon come with an automatic transmission. But one does not fool an economist so easily. I remember thinking, and perhaps arguing, that this depends on consumers’ preferences. It also depends on budget constraints, the second factor in consumer choices. At that time, stick-shift cars cost less at purchase, in gasoline, and I think on long-term maintenance; trade-offs had to be made.
According to an interesting Wall Street Journal story, the small demand for sticks is on the rise, even if their cost advantage has disappeared (Rachel Wolfe, “The 20-Somethings Fueling a Stick-Shift Renaissance,” March 1, 2023). The new appeal comes mainly from younger consumers intent on “taking control of their clutches” or looking cool. Remember that individual preferences are subjective. A mother gave a stick-shift to her son, reflecting that he was thus less likely to text while driving. The demand for stick-shift transmissions is also increasing in high-end cars. A few highlights from the WSJ:
Following a decades long decline, three-pedaled vehicles are experiencing a modest but real resurgence. Manuals accounted for 1.7% of total new vehicle sales in 2023, according to data analytics company J.D. Power, up from 1.2% last year and a low of 0.9% in 2021. The Autotrader marketplace reports a 13% rise in page views for new manual cars in 2023 compared with this time last year. …
“It’s not a statement against electric cars so much as I’m going to try to enjoy the type of driving that’s the most fun to me until I can’t anymore,” says 26-year-old Lucas Marcouiller, an engineering salesman in Warwick, R.I., who has purchased three manual vehicles.
If my old (or deceased) car salesman forgives me for using him as a teaching scapegoat, we may imagine that his implicit and muddled theory was that decisions on which sorts of car to manufacture would soon be made by the government. As we know, politicians and bureaucrats are more rational than consumers. Perhaps the salesman, assuming he was also well versed in the history of economic thought, was envisioning the future advocated by Rexford Guy Tugwell, the socialist economist of FDR’s time? In a 1932 American Economic Review article, Tugwell wrote:
New industries will not just happen as the automobile industry did; they will have to be foreseen, to be argued for, to seem probably desirable features of the whole economy before they can be entered upon.
More seriously, compared with government apparatchiks, car salesmen are saints, as long as they don’t want to rule over others. Yet, there is an important feature of the world that still seems to escape many of our contemporaries: as long as some free market exists and a small minority of consumers are, whatever their reasons, willing to pay for stick-shift cars, they will continue to be produced. It’s called consumer sovereignty.
Mar 2 2023 at 2:13pm
Major difference between the US and Europe on this one. Alexa just told me 80% of cars sold in Europe are manual transmissions and only 3% are in the US. I am led to believe that the reason for this is that not only are manual transmissions cheaper, but higher sales taxes/VAT makes that difference even greater. Further, manuals apparently get better gas mileage and of course Europe taxes that too.
Mar 2 2023 at 2:26pm
Good point. I wonder if it’s partly cultural, too. Americans sit through more traffic and cheerily enter lines in drive-through restaurants, bank teller stops, etc, not to mention the epic car meshes that happen at major sports events. Automatics are much more pleasant in these situations, and Europeans just don’t encounter those as much as Americans.
Mar 2 2023 at 2:35pm
I agree, don’t think there is any question about it really. Could you imagine an F-350 driving around the Altstadt?
Mar 2 2023 at 6:36pm
Henri: I suspect that Parisians, Londoners, or Bruxellois meet as bad or worse traffic than Americans who live in large cities. The factors, I suggest, would be more those than Craig and I mentioned. Also, I don’t know what you mean by “Europeans just don’t encounter those as much as Americans.” Despite higher indirect costs imposed by government, it’s still demand that is imperious, not supply. (See Ruyer’s quote in previous posts of mine.)
Mar 3 2023 at 1:46pm
Sure, Paris and London have notoriously bad traffic. They top this list*, along with Chicago. Then again, Americans commute 75% by car, vs. only about 50% for Europeans.
Personal experience. I’ve spent roughly the same amount of my life in Europe as in the US. In Europe, I have not been through a drive-through restaurant. I have not been to a drive-in theater. I have not spent most of an afternoon trying to get through a downtown area clogged with traffic due to some big event. Not once.
*Bottom of article
Mar 2 2023 at 6:26pm
Craig: The WSJ story suggests that it is not necessarily true anymore (I guess with all the electronics) that manual transmissions are less expansive or use more gas. But he cost advantage was true for a long time, so that in Europe, where gas taxes have been generally much higher than in America and the VAT significantly increases the purchase price of a car, people got used to driving smaller cars with manual transmission. (Narrow streets in old towns and even even narrow country roads have also been a factor in car sizes.)
Knut P. Heen
Mar 6 2023 at 12:28pm
I don’t think the size of the car or clogged streets mattered. In Norway, almost all cars had stick shifts since car rationing was lifted in 1960 (until 2010). Automatic gearing was considered an unnecessary luxury (for people who cannot drive). A likely explanation is that the World War 2 hit Europe harder than the United States, and that post-war poverty in Europe led to cheaper standardized cars with stick shifts. It is much cheaper to produce 100 percent stick than a mix.
The reason we had car rationing in the first place was the Bretton Woods system and the currency balance problem (fixed exchange rate and lack of foreign currency). You could get Eastern European cars, but Western European cars and American cars were rationed until 1960. Gasoline was also rationed after the war because it also had to be imported.
Defense policy may also have played a role. Most military vehicles did come with stick shifts. It is probably a good idea to have soldiers who have experience with stick shifts. This was a serious problem for the Germans during the World War 2 because the soldiers had to learn the stick shifts of the tanks from scratch (never driven a car before).
Mar 2 2023 at 2:22pm
On this, at least, you are in agreement with public opinion. I’m not sure “44% bad” vs “58% bad” is the difference between a saint and a non-saint, but the ordering is the same.
Mar 2 2023 at 2:36pm
You were right to be somewhat skeptical of such a major pronouncement, but one thing I have learned is one should assume that all else equal, consumers will choose whatever’s easier. And on the price point, I think one can also assume that people will continue to get richer, and as long as the cost savings of stick shifts are small, the convenience factor will eventually dominate.
Mar 2 2023 at 6:41pm
Chris: Your “all else equal” is important. And consumers don’t all have the same preferences.
Mar 2 2023 at 3:23pm
Stick shifts require the employment of four limbs when the driver is changing gears. To popularize them in California a marketer just has to show that a stick-shifter delays dementia over the long haul, which I’m sure a motivated researcher can cook up, I mean prove.
BTW, I often leave my old manual-transmission car unlocked in the driveway because the thieves don’t know how to drive it.
Mar 2 2023 at 6:46pm
Stephen: Your last point is interesting. As the WSJ also mentions, lots of people now don’t know how to drive a manual. But in the current (small) renaissance, more youngsters apparently learn to drive with a stick-shift. (As for research, don’t flush the baby of truth with the bath water of laziness, interest, or ideology.)
Grand Rapids Mike
Mar 3 2023 at 1:47pm
Back in the day I had a 3 speed chevy, easy to drive. Also as a part time job as a school bus driver of a stick shift school bus, requiring double clutching, which took a little time to get the hang of. The small return to stick shifts maybe a renaissance of testosterone in young men willing to shed fear of the cancel culture.
Mar 4 2023 at 2:53pm
Pierre: “I remember thinking, and perhaps arguing, that this depends on consumers’ preferences. It also depends on budget constraints, the second factor in consumer choices.”
I would argue that budget constraints would be the first factor in consumer choices. I would prefer a Bugatti Veyron priced at $2,500,00. My budget constrains me to a 2023 Porsche 911 Turbo . I suspect that is my revealed preference.
Mar 4 2023 at 3:51pm
David: You are right if $2,500 is not a typo, that is, if it applies to a used Bugatti Veyron (a very use Bugatti Veyron with perhaps only a tire in working order!).
But if you meant a new Bugatti Veyron priced at $2.5 million, your choice does not say anything about your preferences. A revealed preference is what is revealed to be preferred in your preference scale (or function), not considering your current budget constraint. What your choice revealed about your preferences is that you prefer the Porsche 911 Turbo to, say, the Kia Rio GT, because you could have afforded the latter without changing anything else in your basket of goods and services, but chose not to.
We don’t know if your not choosing the $2.5-million Bugatti Veyron is because (disregarding your budget constraint) you do prefer the Porsche 911 Turbo, or if it is because you would have had to consume much less of other goods and services worth more utility for you than the utility gained with the Bugatti Veyron.
Technically, a revealed preference refers to a basket on a higher indifference curve.
Mar 4 2023 at 4:58pm
Thank you Pierre. As for my particular indifference curve, my MRS is one Veyron to 10 Porsche 911 turbos. Thanks for catching my error. I meant $2,500,000.
Mar 6 2023 at 11:55am
Couple of thoughts on this one.
You assume that your salesman was talking government action instead of market forces. Why? There are no shortage of products that have disappeared from the market even with a passionate niche audience. Try finding a newly made minidisc player, or a mobile phone with a physical keyboard, or removable battery, or one that runs Linux. Your salesman could have just been making a prediction that the demand for automatics would increase, prices for them would drop, and that manual transmission cars might become more expensive relatively shifting the demand curve until the point where supply and demand don’t intersect at a positive price point?
The price differential for rentals outside of the U.S. remains quite large. If you want an AT prices seem to be a minimum of 50% higher, and are often double the MT price.
I used to relish getting a MT rental, but have been driving one for a week on pretty rough Costa Rican roads and my knees are sore from so much shifting!
Mar 8 2023 at 9:58am
Dylan: Recall what I wrote:
Mar 7 2023 at 11:48am
Today’s automatics are (probably) cheaper, definitely faster, and more efficient (better gas mileage) than manual transmissions.
All of which are entirely beside the point. You have to drive a car with a manual. You just steer a car with an automatic.
As pointed out before, having a stick also decreases the probability of your car being stolen.
The government can have my stick shift when they pry my cold, dead fingers from the shift lever.
Mar 8 2023 at 6:00pm
The car salesman was right. I, at least, would have understood his comment to mean that automatic transmissions would dominate the market, not necessarily that you literally could not find a manual transmission. Frankly, if manual transmissions had fallen much below 10% I would have given him the win; at 1.7% his opinion was a home run.