New Jersey has a law that says that you are not allowed to pump your own gas. They have had this law for 70 years. This is, of course, absurd. But if it is so absurd, why do 63 percent of residents actively want to keep the law, preventing Captain Obvious (full official name: State Assemblyman Declan J. O’Scanlon Jr.) from leading a charge to repeal the law? What does this anomaly have to teach us?
The arguments for self-service gas are clear. Pumping your own gas is faster. Pumping your own gas is cheaper. Pumping your own gas avoids someone trying to use other ‘services’ to extract tips from you, which can be stressful. The market has spoken: The ban was originally put into place because people were voting with their feet and wallets for self-serve gas, and self-serve gas has completely won the market battle wherever it hasn’t been banned. People have a revealed preference for self-serve gas. That is a rather strong case, even without the libertarian argument and/or the argument from complexity, that banning an obviously sensible activity damages our freedom, encourages further regulation and other not-so-neat stuff like that. Captain Obvious has so failed to find a good explanation that he has claimed that “The only way to win the argument is if you can make a legitimate argument that New Jersyans are more flammable than other people.” What is the motivation here?
The article draws attention to several interesting potential explanations. Interestingly, it skips over what I would consider the most obvious explanation behind the law, so let’s look at that first.
The easy and most obvious explanation is that the law is about make-work. Gas stations are forced to hire attendants, which are jobs that would not otherwise exist. People who are otherwise zero marginal product laborers (ZMPs), with no skills to contribute, get gainful employment and stay off the public dole in an era where machines are taking their jobs. Ideally they develop good work habits, get experience and eventually make something of themselves. Unemployment is very bad, and pumping other people’s gas maintains the illusion of productivity without doing harm. Back in the 1940s when the law was originally passed the economic logic behind this did not hold water, since there were plenty of manual labor jobs, but today there are not enough such jobs, so there is a case to be made here, but it is not the case anyone seems to be (explicitly) making.
The argument that New Jersey has lower gas taxes and is close to refineries, and thus its gas is cheap and people do not realize how much they pay for pumped gas, may be a small part of the story, but also does not seem adequate. The argument that the gas tax in New Jersey would rise to capture the savings from self-service, and thus full service is effectively free for motorists, is more interesting, and I want to explore more situations of that type in the future, but since prices are already relatively low in New Jersey and the gas tax did not go up as a response, the story does not seem right.
I asked my wife Laura, who had the misfortune to grow up in New Jersey, to explain:
“I would pay two dollars to have my gas pumped. Self-service is annoying! You have to get out of the car, it could be raining, you can spill gasoline on yourself, and then you have to go inside with that little receipt…”
We live in New York City now and it has been a while since she has pumped gas. I explained that the receipt is no longer necessary. This made her less annoyed, but did not change her opinion, as two dollars is still way more than the marginal cost of full service gasoline.
I asked her if there should be a law banning self-service. She said no, of course not, just because I prefer something doesn’t mean there should be a law! She’s pretty awesome. I did point out that in this case it is not that simple, since if you do not mandate full service, full service ceases to exist, but I am happy to report that this did not carry the day.
This was anecdotal evidence in favor of, to quote the New Jersey Senate president, Stephen M. Sweeney, “People have gotten used to it. We like it.”
There are a few ways to look at this. The first is to use the Caves of Steel argument that tiny luxuries are very painful when they are taken away; loss aversion is always bad in humans, but here it is amplified even more. Thus, if you are used to someone else pumping your gasoline, you do not want that taken away from you, as pumping your own gas is “so annoying” even though no one else seems to mind. The article quotes woman-at-the-pump Nicole Mills: “It’s like a little highlight of the day to have that convenience.”
Could it be that when deciding where to go, people are undervaluing small niceties like pumped gasoline? Certainly the cost-benefit ratio seems much better than for more expensive luxuries like nice restaurants or first class plane tickets. When deciding where to get gas, people have been trained in a very simple algorithm: Cheap gas. People hate paying too much for gas. As a result, people are completely obsessed with getting cheap gas, and will be inconvenienced a crazy amount to get it.
A perfect illustration from Gilmore Girls:
LORELAI: No more picking loose change up from the ground. No more driving around looking for cheap gas.
RORY: Which totally defeats the purpose since you wind up using more gas looking for the cheap gas.
These instincts come from fixed-supply-of-money-from-work budget-style planning, where you have exactly enough cash and cannot spend other resources to acquire more except at horrible rates (see yard/bake sales) because making money outside of your job, or working on improving your pay, are not things. This means that spending ‘unnecessary’ funds is toxic, even when the amounts seem relatively small, because it will hurt your ability to get everything you need, and need includes keeping up with the Joneses. If you hired someone else to pump your gas, you would feel guilty, you would break your budget, and you would feel like you were doing something only an upper class person would do – you are bringing in The Help!
If on the other hand you are forced by law to have someone pump your gas, then you get to enjoy your luxurious benefit guilt-free, and the Joneses have to buy it too so you can keep up with them without breaking your budget. Life is better.
Individually, everyone chooses cheap gas. But everyone would be better off if they were forced to not choose cheap gas. In fact, if conditions are right, everyone would be better off if they and only they were forced to pass up the cheap gas. It can also be thought of as a gift: The gift of pumped gas. You would feel weird buying it for yourself, defeating the purpose. But if someone else (say, the State of New Jersey) were to buy it for you? Just what you always wanted!