Induced Demand, Probing the Issue: NMA E-Newsletter #600

In last week’s Induced Demand, A Reality Check, #599, Maryland Member Sherman Johnson raised important concerns that, “even developers must admit that we cannot continue to widen our way out of traffic congestion indefinitely.  More highway capacity means more housing developments and more cars on the road (induced demand).”

His response was in reaction to Chris DiPrima’s NMA op-ed a few weeks earlier. We were curious about Chris’ response to Sherman’s observations. He did not disappoint:

The topic of induced demand is an interesting one, and worth exploring on its own. When I wrote, ‘a simplistic and incomplete understanding,’ I did not mean to imply that induced demand does not exist, but rather that the relationship between roadway supply and vehicle miles traveled (VMT) is not as absolute as urbanists and Vision Zero advocates would have us believe.

While the concept of induced demand is quite old, the research which coined the term was conducted by Mark Hansen and later expanded by Robert Cervero of the University of California-Berkeley. Cervero’s studies went beyond correlation and deeper into causation. As presented in his excellent summary, Cervero makes significant observations which refine the arguments behind a simple relationship between supply and demand:

1. When transportation systems are expanded, much of the “induced demand” is either trips which would have happened outside of a peak (peak shifting) or trips which a person wanted to take, but could not because the system supply was not available (latent demand)

These two types of trips represent the public surplus created by the new system capacity: trips that people wanted to take, but would either put off until after rush hour or cancel completely.

The latter category, latent demand, is the classic ‘induced demand’ that anti-expansion advocates cite when they oppose the construction of new freeway lane-miles. However, per Cervero’s research, it only represents about one-third of the new traffic which appears on those expanded roads. Also, I would suggest that these trips are a direct public benefit: people are able to do more things that they wanted to do.

Attempting to categorize latent demand leads to a fundamental question on the role of government in deciding which trips are acceptable versus expendable. Even in a majoritarian democracy, many of us would find it deeply uncomfortable that our elected leaders can choose that certain trip types are all right, but going a few towns over to check out a new restaurant is undesirable induced demand.

In any case, latent demand is not infinite: there are only so many places one can go, especially in areas which are already fully developed. Transportation planners should account for peak shifting and latent demand when they construct new infrastructure, but these factors are not an excuse not to build at all.

2. The relationship between roadway supply and vehicle miles traveled (VMT) is mediated by land use

Improvements in transportation infrastructure improve travel times. This may cause cities and developers to up-zone and densify areas served by the new infrastructure. This has been true since time immemorial: the construction of roads, and later streetcars, was often made with the explicit purpose of making the adjacent land more valuable. Perhaps more famously, it was a key plot element in Who Framed Roger Rabbit?

It is often the increases in development permitted by agencies following transportation upgrades that induce more trips, not simply the provision of the infrastructure. Counterfactual cases can be found in places like Camden, New Jersey, which has an advanced roadway network but little traffic congestion because there is relatively low-density served by those roads.

3. After six to eight years, about 20 percent of the new capacity is preserved, even accounting for latent demand and land use-induced demand

This point is often lost because 20 percent preservation sounds like an 80 percent failure. However, changes of less than 5 percent can have massive effects on traffic congestion. As anyone who commutes year-round can attest, even the minor reductions in traffic volumes caused by summer holidays often lead to noticeable reductions in travel time.

Sherman and I partially agree when he states, ‘More highway capacity means more housing developments and more cars on the road.’ Where we differ is that I do not believe that more highway capacity must inevitably lead to more development. Indeed, if we as a society are willing to stop needed transportation infrastructure growth as a congestion mitigation measure, we should equally be able stop increasing density levels so that we do not overwhelm our transportation system.

The answer is a balance between the transportation system and land use intensity rather than giving into the impulse to densify at any cost. Here, Sherman and I are in complete agreement. Rather than continuing to consolidate the nation’s wealth and opportunities in a few major cities, people and companies should grow in areas which already have surplus infrastructure supply, or which can build that supply without degrading quality of life for everyone.

At the very least, employers can make policies like flexible work hours and telecommuting common. This demand-side approach addresses the congestion problem directly and effectively, as we have seen during the unprecedented changes in demand caused by shelter at home orders.

By contrast, legislating behavior through the misery of traffic congestion is, at best, a deeply unpleasant way to modify behavior. It leads directly to the extra turns and neighborhood shortcutting that are undesirable and more dangerous to both residents and through motorists.

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