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An economic crisis in your teens can alter your behavior for life, economists find

An economic shock 40 years ago still impacts the behavior of people born in 1964

Motorists wait in a four-block-long line for gasoline at one of the few stations open in the Los Angeles area early on May 6, 1979. Waits of three hours were not uncommon as about 855 of area stations closed Sunday, and those open sometimes closed after a few hours. (AP Photo/Reed Saxon)

The line wasn’t supposed to dip downward like that.

Americans’ transit behavior changes slowly, if at all. But in chart after chart, economist Christopher Severen noticed people born around 1964 had a different relationship with cars than those born before or after them. They drove less and used transit more.

Severen might have dismissed it as a coincidence if he hadn’t realized the babies of 1964 would have been learning to drive around 1979 or soon after. That’s the when Ayatollah Khomeini rose to power and Iran’s oil production cratered and gasoline prices jumped more in a year than they have at any time since, Labor Department data shows.

Could coming of age during the oil crisis really have scarred people for life and permanently changed their driving behavior? Severen, who works at the Federal Reserve Bank of Philadelphia, attacked the question with his full statistical arsenal.

His analysis, conducted with Arthur van Benthem of the Wharton School at the University of Pennsylvania, was recently circulated as a working paper from the Philadelphia Fed and from the National Bureau for Economic Research.

The economists analyzed millions of government survey responses from the 1960s through the 2010s and found it wasn’t just the Iran oil crisis. Gas prices left scars whenever and wherever they spiked throughout that period.

If inflation-adjusted gas prices doubled while someone was learning to drive, they found, that person would be less likely to drive to work later on, and would drive an average of 900 to 1,100 fewer miles each year as adults. They are also less likely to own gas-guzzling light trucks and more likely to take public transit.

“We find that pretty surprising,” Severen said. “In the U.S. most people drive to work and not much has budged that over the past few decades.”

Drivers are only vulnerable to this level of scarring during that narrow slice of their teenage years when they’re just learning to drive. When prices jump, scars don’t appear in folks who were younger than 15 or older than 18. In some analyses, the researchers shifted the window to fit each state’s driving-age requirements.

“You develop a particular taste for driving from this formative window of when you’re roughly 15 to 18, and that’s influenced by gas-price volatility during that period," Severen said. "People who experience these large shocks have a lower taste for driving.”

The scars can’t be explained by age, race, location, drivers’ license requirements, or even whether or not gas price changes coincided with a recession.

Economists are finding evidence of scars like this throughout the economy, on scales ranging from individual shopping habits to the movements of the largest component of Gross Domestic Product.

Last year, Ulrike Malmendier, a professor at the University of California at Berkeley, and Leslie Sheng Shen, now at the Federal Reserve, released an ambitious working paper in which they analyzed decades of data from several long-running surveys to estimate how high unemployment shaped consumers’ psyches down the road.

People who were unemployed substantially longer (one standard deviation more) would later spend about $1,035 less on food, and $4,492 less overall than a typical consumer, they found. Scarred consumers also bought more things on sale and used more coupons. The trends persisted even after accounting for possible complicating factors, such as income, wealth, age, geography and demographics.

When Americans’ scars pile up they can shift the entire economy. Consumer spending has long been the engine of U.S. economic growth. And the periods where it has been lowest in recent decades coincide with periods when the highest percentages of consumers bear the scars of a lifetime lived around high unemployment, Malmendier and Shen find.

A 2014 analysis in Review of Economic Studies by Paola Giuliano and Antonio Spilimbergo found Americans who lived through a recession between ages 18 and 25 “believe that success in life depends more on luck than effort, support more government redistribution, and tend to vote for left-wing parties,” and that these beliefs -- especially in government redistribution of resources -- can last for a lifetime.

The archetypal example of this phenomenon is the Depression Generation. The scars left on men and women who came of age during the Great Depression influenced their economic and political beliefs for decades.

If you’re looking for an analogue in the current era, we’ll note the Great Recession shaped the formative years of just one generation: the Millennials.

Millennials really are special, data show