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Understanding Transportation Capacity Expansion: Latent & Induced Demand

This document, presented at the UCLA Public Policy Symposium, explores the complex dynamics of transportation capacity expansion, focusing on induced demand and its implications for traffic congestion. It discusses how expanding capacity impacts investment benefits, travel behaviors, and the environmental and safety consequences of increased vehicle use. The analysis highlights the distinction between short-term reactions and longer-term changes in household and business behavior, along with the critical need to address the underlying issues rather than simply expanding infrastructure to alleviate congestion.

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Understanding Transportation Capacity Expansion: Latent & Induced Demand

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  1. What Really Happens When We Expand Transportation Capacity? Don Pickrell Volpe Center, U.S. Department of Transportation UCLA Public Policy Symposium: Tackling Traffic Congestion Lake Arrowhead, California October 20, 2002

  2. Latent Demand, Induced Demand,and Capacity Expansion • Responses to added capacity • How they affect investment benefits • Can congestion get worse? • What are the real issues? • Fighting induced demand vs. fixing the underlying problems UCLA Policy Symposium: Tackling Traffic Congestion

  3. Short-Term Responses • Speed on expanded facility rises • Travel diverted to expanded facility • From parallel facilities or routes • From other hours (trips rescheduled) • From other modes (carpools, transit) • Usage of expanded facility increases over time, speed slows from “opening day” • Speeds may increase on other facilities, or at other hours UCLA Policy Symposium: Tackling Traffic Congestion

  4. Longer-Term Responses • Households • Linked trips may be “unchained” • More outside-the-home activities • Changes in auto ownership possible • Some relocate farther from work, other activities • Businesses • More frequent orders, shipments • More logistics-intensive organization • Some relocate to more accessible sites • Facility use gradually increases, speed slows further UCLA Policy Symposium: Tackling Traffic Congestion

  5. How Induced Demand Affects Benefits from New Capacity • Erodes immediate benefits to original users • Adds new benefits as it does • Total benefits with induced demand can be higher or lower than without it • Extent of capacity expansion • Sensitivity of demand to faster travel • Relationship of speed to use on improved facility • Induced demand cannot eliminate benefits UCLA Policy Symposium: Tackling Traffic Congestion

  6. Can Induced Demand Make Congestion Worse? • Not by itself • Together with other factors, maybe • Rapidly growing demand • Irreversible cuts in transit service • Why do people believe it can? • Investments often made where demand is growing rapidly • Compare congestion with expansion vs. without it, not before vs. after UCLA Policy Symposium: Tackling Traffic Congestion

  7. The Real Issueswith Induced Demand • Environmental impacts of added travel: air pollution, greenhouse gases, noise • Safety consequences of more driving (including for pedestrians) • Continued dispersion of land uses (sprawl) • Fuels public demands for continued expansion UCLA Policy Symposium: Tackling Traffic Congestion

  8. Underlying Sources of Problems • Environmental impacts stem from vehicle technology, carbon fuels • Safety impacts have complex causes • Land use impacts are responses to underpricing of transportation and utilities, housing subsidies • Demands for more capacity persist because fuel tax disconnects payments from use • Fighting investment doesn’t fix these UCLA Policy Symposium: Tackling Traffic Congestion

  9. Why Not Solve the Real Problems? • Tailpipe and fuel standards “second best,” but hugely successful • Fixing CAFE or raising fuel taxes could reduce greenhouse gases • Re-focusing traffic engineering, insurance reform would help safety • Changing pricing and investment policies, reforming zoning would improve land use decisions UCLA Policy Symposium: Tackling Traffic Congestion

  10. Is Induced Demanda Serious Problem? • Infrastructure planning and finance have problems, but induced demand doesn’t cause them • Congestion is the wrong signal to build • Pressure to expand comes from underpricing and buildup of fuel tax revenues • Program structure turns costs into benefits • Expanding capacity won’t eliminate congestion, but the real problem is pricing, not induced demand UCLA Policy Symposium: Tackling Traffic Congestion

  11. Points to Remember • Induced demand affects expansion benefits, but can’t eliminate them • It won’t make congestion worse • Real issues are externalities from added travel, land use impacts • Need to address their causes, not fight expansion • More capacity won’t fix congestion, but not because of induced demand UCLA Policy Symposium: Tackling Traffic Congestion

  12. Economics of Capacity Expansion UCLA Policy Symposium: Tackling Traffic Congestion

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