Everything about Induced Demand totally explained
Induced demand is the phenomenon that after supply increases, more of a good is consumed. This is entirely consistent with the economic theory of
supply and demand; however, this idea has become important in the debate over the expansion of
transportation systems, and is often used as an argument against widening roads, such as major commuter roads. It is considered by some to be a contributing factor to
urban sprawl.
Effect in transportation systems
Latent demand has been recognised by road traffic professionals for many decades.
J. J. Leeming, a British road-traffic engineer and
county surveyor between 1924 and 1964, described the phenomenon is his 1969 book:
Motorways and bypasses generate traffic, that is, produce extra traffic, partly by inducing people to travel who wouldn't otherwise have done so by making the new route more convenient than the old, partly by people who go out of their direct route to enjoy the greater convenience of the new road, and partly by people who use the towns bypassed because they're more convenient for shopping and visits when through traffic has been removed. |
He went on to give an example of the observed effect following the opening of the
Doncaster Bypass section of the A1(M) in 1961.
Price of road travel
A journey on a road can be considered as having an associated cost or
price (the
generalised cost,
g) which includes the
out-of-pocket cost (for example fuel costs and
tolls) and the
opportunity cost of the time spent travelling, which is usually calculated as the product of travel time and the
value of travellers' time.
When road capacity is increased, initially there's more road space per vehicle travelling than there was before, so congestion is reduced, and therefore the time spent travelling is reduced - reducing the generalised cost of every journey (by affecting the second "cost" mentioned in the previous paragraph). In fact, this is one of the key justifications for construction of new road capacity (the reduction in journey times).
A change in the cost (or price) of travel results in a change in the quantity consumed. This can be explained using the simple
supply and demand theory, illustrated below.
For roads or highways, the supply relates to capacity and the quantity consumed refers to vehicle-kilometres travelled. The size of the increase in quantity consumed depends on the
elasticity of demand.
Elasticity of traffic demand
Research indicates that the elasticity of traffic demand with respect to roadway expansion is between 0 and 1, indicating that a 1% increase in roadway expansion will generate less than a 1% increase in traffic demand. However it's greater than 0%, so new roadway construction will result in some additional traffic that wouldn't have occurred but for the new capacity. In the long term, however, traffic demand may increase by more than 1%, since elasticity of demand is a
partial derivative defined in the short term only. In other words, this figure between 0 and 1 assumes that, apart from the increased supply,
all else is constant, which is unlikely to be true in the long term.
In the short term, new demand arises from either people making trips they wouldn't have made before (because the cost of the trip has decreased), or from people retiming trips to nearer their preferred time (for example they can reduce
schedule delay). For example, people might travel to work earlier than they'd otherwise like, in order to avoid peak period congestion - but if road capacity is expanded, peak congestion is lower and they can travel at the time they prefer.
New demand may also come from those who had used public transport before a roadway expansion, now deciding to switch to car use.
In the long term,
land use patterns alter - for example new development occurs around the road with the new capacity, increasing demand for travel. Peoples' choice of home and workplace locations also alter because of the new road (and although this is to be expected from urban economics, it also constitutes induced travel, usually because people travel further to get to work as a result of the new road, increasing overall levels of vehicle-kilometres). Increased employment along a road may result in home-building along the same road, attract more businesses in a
positive feedback loop. Eventually, the induced demand may cause road capacity to be reached (again).
Although planners take into account future traffic growth when planning new roads (this often being an apparently reasonable justification for new roads in itself - that traffic growth will mean more road capacity is required), this traffic growth is calculated from increases in car ownership and economic activity, and doesn't take into account traffic induced by the presence of the new road (for example it's assumed that traffic will grow, regardless of whether a road is built or not).
In the UK, the idea of induced traffic was used as a grounds for protests against government policy of road construction in the 1970s, 1980s and early 1990s, until it became accepted as a given by the government as a result of their own
SACTRA (Standing Advisory Committee on Trunk Road Assessment) study of 1994
(External Link
). However, despite the concept of induced traffic now being accepted, it isn't always taken notice of.
A classic example of induced demand was the construction of an orbital
motorway around
London, the
M25, in the late 1980s and early 1990s. In the short term (almost from opening), the motorway became extremely busy and often congested (as planners underestimated the level of demand, because some was induced, and thus the road didn't have high enough levels of capacity to accommodate it). In the long term (over a few years), new development occurred around the new motorway and people adjusted their home and work locations to depend upon it, further increasing demand.
Mitigating the induction of demand
Induced traffic can be avoided if the generalised cost of travel doesn't decrease when new road capacity is added (known as "locking in" the benefits (for example journey time reductions) of new capacity). This may be achieved through:
- Road pricing - for example the user pays for the journey time reduction
- Increasing the cost of parking, by limiting parking spaces. This has been done with success in Sydney, Australia.
- Allocation of the new road space to particular users, for example using HOV lanes - the generalised cost of travel for some users will remain similar, but the cost for particular users will decrease, encouraging a shift to that use. HOV or multiple occupancy lanes are the classic example, an example being the widening of the M1 motorway to the north of London, where the extra capacity will be used for an HOV lane during the peaks. However, HOV lanes which are additional to existing capacity do result in an induced rise in overall traffic, because the shift of HOVs to the new lane releases capacity in the existing lanes, reducing the generalised cost of journeys in those lanes and thus increasing demand.
- Zoning to prevent excess development of new areas served by increased road capacity has been proposed as a solution; however, municipalities often lack the power or the will to counter development interests.
- Increasing the cost of travel, for example by increasing fuel exercises or car registration costs.
- Increasing the cost of drivers licenses in certain undesirable motor vehicle classes (such as SUVs), while decreasing costs for more desirable modes of transportation (such as buses).
Reduced demand (the inverse effect)
Just as increasing road capacity reduces the cost of travel and thus increases demand, the reverse is also true -
decreasing road capacity
increases the cost of travel, so demand is reduced. This means that theoretically, in the long term, the closure of a road or reduction in its capacity (for example reducing the number of available lanes) will result in the adjustment of traveller behaviour to compensate - for example, people might stop making particular trips, retime their trips to less congested times or switch to
public transport, depending upon the values of those trips or of the
schedule delay they experience.
Reduced demand has been demonstrated in a number of studies associated with bridge closings (to be repaired) or major roads rehabilitation projects. These studies have demonstrated that the total traffic, considering the road or bridge closed and alternative roads where this traffic is diverted, is lower than that of the previous situation. In fact, this is an argument to convert roads previously open to vehicle traffic into
pedestrian areas, with a positive impact on the environment and the congestion, as the example of the central area of
Florence,
Italy.
Similarly, reducing public transit services will reduce to some extent the use of those facilities, where trips again may be avoided or switch to private transport.
The debate
Many environmentalists believe that by encouraging development many kilometres away from jobs and services, freeways contribute to increasing traffic flows, and thus the freeway ends up just as congested as previously, thus requiring the freeway to be widened (again). The evidence is that the congestion won't be as bad as prior to the new construction, but that traffic congestion won't simply disappear.
Propononents of road construction will note that the fact that there's additional travel indicates that the roadway construction or expansion is adding value to those users (
consumer surplus).
This argument ignores that consumer surplus of a group of road users doesn't guarantee an increase in
aggregate utility. It also ignores that some
negative externalities such as global
pollution often go unvalued in
economic analyses of road projects (some countries ignore these externalities altogether, and others evaluate them qualitatively).
Some roadway advocates note that because of underlying factors (for example population and income growth), traffic will grow anyway, whether or not freeways are expanded (this being the argument mentioned previously in relation to traffic forecasts). Thus, without widening, traffic would be even worse than it is, contributing even more pollution, something which occurred in Sydney, Australia, during the New South Wales state government's "No Freeways" era in the late 1970's and early 1980's. Environmentalists reply that the new induced traffic will generate more
pollution and exacerbate the
greenhouse effect more than leaving the road unbuilt, a theory that's with merit if public transport initiatives are not developed in accordance with the freeway construction such as the provisioning of a dedicated bus lane on the Sydney Harbour Bridge when the Sydney Harbor Tunnel was built.
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