The money value of time

Photo Credit: The Clock Works, Unlimited

Our Company held an event at our San Diego facility last Tuesday, June 5. Quite a few people from our Long Beach headquarters traveled to the event and it's true that alcoholic beverages were served. Thus, we determined that it was in our best interest to hire a so-called "party bus" to transport our people to the event.


My first calculation involved determining how much money we'd save in fuel by avoiding individual drivers (ignoring the possibility of carpooling). It turned out that, with reasonable assumptions, we'd avoid purchasing about $300 worth of gas. The cost of the party bus exceeded this by a factor of three, so it was risk avoidance and a good time at the cost of $600, money well-spent.


On the way down to San Diego, I was talking to one of my two partners in the Company, who suggested that I evaluate my strict 55 m.p.h. self-imposed maximum speed with respect to the value of my time. Of course, I pointed out to Brian that I'd done so on several  occasions. But that was using numbers applicable to my Jeep Grand Cherokee and my Land Rover LR3. Even with those, it was clear that saving fuel by driving 55 m.p.h. was a philosophical rather than an economic decision. I suspect that with my current vehicle, a Lexus CT200h (basically a re-badged and upgraded Prius), the numbers will be worse. Let's see.


Since many of the fuel-saving techniques I used in my previous vehicles are superfluous in the Lexus (it turns the engine off at stop lights, turns it off and uses some of the gravitational potential energy in travelling down hills to charge the battery by using the transmission to turn the electric motor to a generator, etc.) I think I'll get fairly close to my fuel savings over the "typical" driver of my vehicle by simply comparing my fuel economy to the EPA ratings for the vehicle.


Inverting the average rating for the CT200h of 42 m.p.g., the EPA suggests that the typical driver uses (1/42)=0.0238 g.p.m. (gallons per mile). My economy for the duration I've had the car is  50.49 m.p.g., so I use (1/50.49)=0.0198 g.p.m. Thus, for every mile I save 0.00400 gallons, currently worth (at $4.159/gallon) $0.0167.


On the other hand, at 55 m.p.h. it takes me (1/55)=0.0182 hours to travel that mile, whereas at 70 m.p.h. it would take me 0.0143 hours. Thus, it takes me 0.00390 hours longer to drive a mile. Since I'm reluctant to provide numbers on my blog that would enable someone to calculate my salary, I'll determine what salary would equate these numbers. This is simply a matter of dividing $0.0167 by 0.00390, yielding $4.28/hour. Suffice it to say that that severely underestimates my hourly cost.


Now, it's true that there are many inaccuracies in the calculations above. For example, it really should be isolated to highway fuel economy, where the EPA thinks I'll get 40 m.p.g. and I actually get more like 55 m.p.g. Using those numbers, $7.27 would be the wage that represents the break even point. Surprisingly, my wage exceeds this number as well.


The conclusion is, of course, that now more than ever my driving to achieve maximum fuel efficiency derives much more from philosophy (and some would say eccentricity) than economy.