Concept: What is Induced Demand?

This is an article I wrote for BikeHouston.

The term “Induced Demand” can seem intimidating. In reality, induced demand is simple: it is merely supply and demand applied to transportation infrastructure.

As you may remember remember from economics 101, “as supply increases so does the quantity demanded”. If the number of highway lanes increase, temporarily decreasing traffic and congestion, the number of drivers will increase. The increased supply (highway lanes), lowers the cost of driving (less gas consumption, decreased travel times), which results in more people being able to afford driving. Without a deeper cost-benefit analysis this might appear to be a good thing: now even more people who don’t have the extra time or money can afford to drive.

However, lowering the cost of driving, and thereby increasing the number of drivers will result in similar if not greater traffic congestion! More lanes means more drivers but similar levels of congestion. Houston already experienced this with the expansion of the Katy Freeway:

With 26 lanes at its widest point, the Katy Freeway in the Houston metro is the Mississippi River of car infrastructure. Its current girth, which by some measures makes it the widest freeway in North America, was the result of an expansion project that took place between 2008 and 2011 at a cost of $2.8 billion. The primary reason for this mega-project was to alleviate severe traffic congestion.

And yet, after the freeway was widened, congestion got worse. An analysis by Joe Cortright of City Observatory used data from Houston’s official traffic monitoring agency to find that travel times increased by 30 percent during the morning commute and 55 percent during the evening commute between 2011 and 2014. A local TV station found similar increases.

The Sisyphean saga of the Katy Freeway is a textbook example of a counterintuitive urban transportation phenomenon that has vexed drivers, planners, and politicians since the dawn of the automobile age: induced demand.

https://www.citylab.com/transportation/2018/09/citylab-university-induced-demand/569455

Increasing roadway capacity fails to improve congestion! And this has already been proven in Houston!

Increasing roadway capacity thereby increases all the negative externalities of cars (e.g. pollution, anti-urbanism, and car related fatalities) with additional and significant costs of expanding the highway!

Externalities are another economic term: a cost which are not paid for in a transaction. If someone liked to breed “murder hornets” for fun, the negative externalities would be neighbors getting stung (if the neighbors were not paid for for the pain and suffering of the sting, the cost to the community would not be covered).

The problem with cars is that there are massive externalities from driving them: pollution, anti-urbanism, and car related fatalities, to name just a few. These costs are not recouped by increasing the number of cars, they are only compounded. What a city should aim to do is capture those externalities in the cost of driving everyday. Things like surge/traffic pricing, paid parking, and paid lanes all internalize those costs, so that the true cost of driving is more accurately reflected in the price.

Limiting the number of lanes temporarily increases the cost of driving (increased time in traffic, greater fuel costs) which causes a decrease in the number of cars on the road. In other words: decreasing the number of lanes results in the same congestion but with less cars! But decreasing the number of lanes does not capture the externalities of driving unlike the potential solutions outlined above.

If externalities are “priced in”, urban planners have the ability to create alternative transportation infrastructure. In other words: with the money from surge pricing or parking meters, a city is able to create infrastructure for less costly modes of transportation… such as biking!

The creation of more bike lanes follows the same principle – the greater supply of bike lanes, the more bikes on the trails! If the supply of bike lanes increases, making it less costly to bike (more space on the paths and better maintained), than the number of cyclists will also increase.

Moving from an equilibrium with many negative externalities, to an equilibrium with many positive externalities is a good thing. Cycling has many positive externalities: physical fitness, compact city design, and far less pollution then cars. We need to make sure these externalities are reflected in the price of transportation options (“is it safe and easy to bike to work?”).

In fact, right now we are experiencing demand far outstripping supply – bike lanes are packed to capacity and people are having to bike on regular roads to compensate. Bike shops, and bike share programs are busier than they’ve ever been and many cities have installed many temporary bike lanes to compensate. Of course, more bike lanes will mean more riders – but this is a good thing! A city should want all the benefits that come from a cycling populace, but a city doesn’t want the downsides that come from unnecessary driving (when the cost of negative externalities are not priced in).

In the age of coronavirus this has become more important than ever. People are reluctant to use public transportation where it is difficult to social distance. On the other hand, the cost of owning and maintaining a car is prohibitive for many. If cycling infrastructure becomes more available then more people will use it! Cycling, given sufficient infrastructure, is the solution that Houston and America needs.

Busy bike paths over busy highways!