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Fuel economy and timing are not really directly related however if you advance your timing what you are in effect doing is throwing spark earlier and if you overdo it you are sparking before you have optimum compression. You won't get as much power. Over advance it and you are sparking when the intake is still open and you backfire through the carb, (car fires are not good) We used to advance the timing by ear and then pop the throttle. We were trying to increase acceleration which you can to a point however the car may die under a load also as if it sparks to early without the compression needed you get a poor burn and yes that will hurt economy and mostly power.
 

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Fuel economy and timing are not really directly related ...
Ignition timing and fuel economy ARE directly related. In fact, fuel economy is one of the main reasons distributors have a vacuum advance. Advancing the initial timing up to the point that the engine knocks under heavy load and than backing off a degree or two is a good way to set it for both power and economy. Compression ratio, temperature and the octane of the fuel you're using will also play a major part in how far you can advance your timing without knocking. I have my '85 Mustang GT set at 14 deg BTDC and notice a definite improvement in throttle response. However, in order to prevent knocking, I have to run premium gas (running that far advanced doesn't help my pocket book due to the $$/gal price, but it definitely is more fun to drive). The stock initial timing on a '68 302-2V is 6 deg BTDC. Try advancing it to 10 deg BTDC and see if you have any knocking with the fuel you're using. Knocking can destroy your pistons over time if you're not careful. Good info below:

http://www.carbdford.com/viewtopic.php?t=5543

http://en.wikipedia.org/wiki/Ignition_timing#Vacuum_timing_advance
 
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