How do we address "Sunk Cost Bias"?

When someone is interested in shifting from car dependence to greater reliance on active and public transportation, they're often faced with a problem: the vehicle itself, one of the greatest costs of car ownership, is already paid for. Unlike gasoline and parking, which are relatively fixed and recurring expenses, a car is a sunk cost--the purchase is in the past, and much of its value is irretrievable. At that point the only really noticeable costs of driving--the ones that affect you on a regular basis--are gas, insurance, maintenance, and parking. Taking only these into consideration can make driving seem much more affordable.



This is less applicable to those who wish to sell off their vehicle and abandon car ownership entirely, but few people are willing to take such a leap without trying a car-lite lifestyle first. For those who just want to dip their toes in the water, to try something between complete car dependence and complete transit dependence, using public transportation isn't so much a replacement and reduction of costs as it is an additional cost. Not only do you still have to pay for insurance and some gas, you now have to pay for bus fare as well, and suddenly the savings don't seem like such a great deal compared to the relative inconvenience of transit (excluding the few places in the country where transit is actually more convenient). It's a catch-22: as long as you're holding onto the car you're not saving a lot of money, but unless you're saving a lot of money you may not be convinced to get rid of the car.

This problem is compounded by something I'm calling "Sunk Cost Bias," the tendency to try to make the most of your investment by driving more. This may sound foolish since the more you drive the more the costs pile up, but, in a way, it's also perfectly sensible. After all, the more miles you get out of your car, the lower the per-mile cost of ownership. And if you've already got the car and don't have a monthly transit pass, a trip on the bus or train can actually cost more than driving if you're only going a short distance.

We all know that public transportation is a less expensive way to get around that owning and driving a car, but what's less appreciated is that it's not a straight line from one extreme to the other. The jump from car-free to car-lite is massive. In reality, the spectrum of car usage and costs looks something more like this:

Just replacing some car trips with bus/train trips won't save you much money, but for many people getting rid of the car altogether may seem too drastic. The question then, as policy makers and policy advocates, becomes how to bridge this gap. How do we make it more appealing to try a car-lite lifestyle, with the hope that some who try it will end up going car-free?

Here are just a few quick ideas:

  1. Widespread adoption of mileage-based insurance rather than a flat charge could reward people for driving less.
  2. Likewise, vehicle-miles traveled fees instead of (or in addition to) gas taxes, which will be ever-less-burdensome as car mileage improves.
  3. There's also evidence that offering drivers free transit for a few months can change their long-term commuting habits.
  4. Renting out your car while you take the bus might also be fairly lucrative. Maybe some car-share services out there are interested in buying peoples' cars and including a bunch of free access to their service in addition to a decent chunk of money.

None of these feel like they're enough though. For nearly all the people I know who don't own cars, it took moving to a new city or a maintenance catastrophe to finally get rid of them. (In my case, both at the same time.) It shouldn't be such a big deal to consider ditching your car.

So what do you think? If making the car-lite experience more appealing is critical to getting more people to go car-free, what can we do to improve things?