What If We Supplied Hamburgers the Same Way We Supply Roads?
The concept of “induced demand” for road space essentially means that new, or widened, highways will entice more drivers onto the roads, negating any congestion-reducing benefits of the new road.
But induced demand doesn’t just apply to roads. Broadly speaking, it’s an economic concept that goes something like this: If something is free, or low cost, people will consume more of it.
Here’s an analogy, courtesy of a commenter at Greater Greater Washington, that gets to the heart of the matter:
Let’s give everyone free McDonald’s hamburgers. Let’s put 10,000 hamburgers a day on a table in front of the Capitol (or wherever).
What would happen? People would take and eat the hamburgers, and once word got out, all 10,000 hamburgers would be taken very quickly every day. We may thus infer that because people need food and they really seemed to like those burgers, McDonald’s hamburgers are an important public good.
A city planner might notice a problem: those 10,000 hamburgers just aren’t enough. They get taken very early in the morning, so not everybody has a chance to get a hamburger. The obvious solution—because burgers are a highly-valued public good—is to provide more free burgers. So the city planner starts to provide 20,000 hamburgers a day.
You can see where this is going. People start going out of their way to get the free hamburgers, and planning their day around that trip. The city has to keep providing more and more free burgers—eventually millions a day—to keep satisfying the demand for free hamburgers.
Elsewhere on the Network today: Kaid Benfield at the Natural Resources Defense Council’s Switchboard blog says advocates for sustainable cities should be careful not to parrot buzzwords like “vibrant” so often they become meaningless. Walkable Dallas Fort Worth attempts to quantify the economic value that bustling sidewalks bring to a city. And Strong Towns wonders whether we’re seeing a fundamental shift in the way people view and value car parking facilities.
My conception of induced demand differs somewhat from yours.
With respect to roads, induced demand means (in my view) that policies that enable driving to be done faster — whether through adding lanes, improving transit alternatives, or imposing tolls — will engender (“induce”) an increase in travel (“demand”). Whether that increase entirely negates the original gain in speed depends, at least mathematically, on the time-elasticity of driving. If that parameter is less than one, some of the original speed gain will persist. Still, *any* increase (or “rebound”) in travel will eat up some of the gain in speed and will thus itself be somewhat offset due to the disappearance of some of the new trips that were attracted by the initially higher speed.
My points are (i) the congestion-reducing benefits of the hypothesized new lanes (or other policies) are reduced but not necessarily negated by the induced demand, and (ii) your analogy to free goods (whether hamburgers or roads) doesn’t pertain to induced demand and isn’t helpful, in my view.
You couldn’t find a picture of a hamburger? That’s a chickenburger.
If you want the analogy to be more exact, you have to add a couple of points:
— There is so much demand that people line up for the free burgers and waste much of their day standing in line, complaining that the government does not provide free burgers quickly enough to eliminate the lines.
— As people shift from other foods to beef, methane emitted by the cows becomes a major cause of global warming.
— This unhealthy habit causes an epidemic of obesity.
I think you are using the usual definition of the term “induced demand,” as it is applied to highways.
But what would you call the fact that the article talks about? If we give away a product for free, people will consume more of it. If you don’t want to call this “induced demand,” then what should we call it?
Whatever we call it, free parking and free use of road space does increase driving dramatically.
The burger analogy is more an illustration of the fact that people will over-consume anything that is free (when demand is not bounded by price, it is not clear that there will necessarily be any boundary.)
Providing goods for free, or at very low cost, is also an issue with roads, but it is a different issue from induced demand.
Imagine you look at a static “snapshot” of current road usage – there are X amount of car trips or vehicle miles being used right now – and assume that the level of demand in the current equilibrium is fixed.
If you add more road capacity, and assume demand won’t change, then you would infer that all of the additional capacity will serve to speed up travel and reduce congestion.
However, if you consider that the cost of driving on a roadway that is free (or cheap) but congested is paid in time, then by easing congestion you have effectively reduced the price. When price goes down, you expect demand to go up, and therefore some of projected time savings will never materialized, because people will take more car trips.
If roads were very expensive, such as if all roads were tolled at a high rate, we would expect many people to find alternatives to driving. Then, if we reduced the price of the tolls, we would expect more people to switch to driving. This is exactly what happens when add road capacity, except, as I mentioned above, the price is measured in minutes instead of dollars.
My problem with this analogy is that actually McDonalds hamburgers are very definitely government subsidized food as a result of fuel and corn policies. Check out King Corn, which outlines the US government’s “Cheap Food Policy” in very clear terms. Surprise! Obesity is a health crisis! (insert daily plea for fee/dividend carbon plan here)
I have never liked calling it “Induced Demand,” because calling it “Demand” leads to confusion.
In basic Economic terms, the Demand remains unchanged. The effect is a response to a change in Price, resulting in a higher Quantity of consumption.
Transportation had a problem in the old days because people assumed that the existing Quantity (Q1, the observed volume of trips) = Demand. Then when they changed the Price (made trips easier by building new roads) they would observ a higher Q2. That’s what you get when you don’t cover your economic basics…
It would be accurate enough to call these “induced trips,” but “Induced Demand” is confusing and leads to unproductive, mystical thinking.
Put in the work to produce reasonable approximations of Demand Functions, and all the fuzzy thinking and rhetorical nonsense about traffic that “disappears” can be avoided, folks.
The link to NRDC’s blog and the reference to “buzzwords like ‘vibrant'” made me think of other overworked terms such as “world class”. I guess that “vibrant” could be considered the opposite of “deadsville”, but it does seem to be bandied about without a clear definition.
Guest wrote: “In basic Economic terms, the Demand remains unchanged.”
More accurately, the Demand Curve remains unchanged, but Demand increases.
@0c6a1ba3c059e75968ce271f4ea79d78:disqus , saying that “Demand increases” is imprecise, and it becomes confusing or misleading.
In any meaningful way, Demand is a function (or the Demand Curve as you indicate). What you mean is that the Quantity of the Demand increases as Price decreases. Any basics Economics graph you find will label the Demand Curve as “D,” and the Quantities as “Q1,Q2…” associated with their Prices “P1, P2…” Any “D2” you find on a graph will, in fact, be a separate Demand Curve.
Saying “Demand increases,” suggests a new, higher Demand Curve, rather than a higher Quantity on the same Demand Curve. It may not be “wrong” to employ such language, but it is imprecise and prone to confusion.
Now, in laymen’s terms, people do not decide to go drive around because a road is built. They already want to go drive around, but don’t do it because their personal cost is too high in some way. The road does not increase their underlying desire to drive somewhere, they just do it more because now they are able to. This is important because it affects the way we understand the choices that people make and the utility they derive.
I suspect this is why some advocates refuse to discuss the issue in complete and accurate terms, because they would have to admit that some of their strategies that involve making driving more difficult reduce utility.
Well heck, just tear down the road. Then no one will need it.