Why is induced demand still ignored?

An excellent recent article on CityLab discusses the important concept of ‘induced demand’ – the phenomenon where additional road capacity encourages more people to drive and fills the road back up again – as well as asking the important question of why is so much money still being spent on road widening when we know it doesn’t work.

For those not familiar with induced demand, it is an incredibly important concept in transport planning, and has been known about for many decades:

Economist Anthony Downs is often credited with first articulating this “iron law of congestion” in 1962, as construction crews were hacking interstates through American cities. Downs published a seminal paper with a stark warning: “On urban commuter expressways, peak-hour traffic congestion rises to meet maximum capacity.” In other words, adding lanes won’t cure snarled traffic; the additional car space inevitably invites more trips, until gridlock is as bad as ever.

Not only has induced demand been known about for a long time, it has also been measured across many countries again and again, highlighting the futility of trying to solve congestion by building wider roads:

Downs’ iron law applies not only to U.S. cities, which have grown more traffic-jammed despite billions of dollars in fresh pavement, but also to those around the world. Highway expansions in Norway and Britain haven’t reduced congestion there, either. The principle now meets little opposition among economists and urban planners. “It’s widely accepted,” says John Caskey, who teaches induced demand as part of his urban economics course at Swarthmore College. “For economists interested in urban transportation, there isn’t really any debate.”

And yet, billions upon billions of dollars continues to be spent on road widening in the hope that the next road might actually – finally – achieve the desired goal of reducing congestion. Despite somewhat better rhetoric than most recent governments, the current government’s transport plans are still very tilted towards road building rather than public transport, walking and cycling:

Beyond what’s in the NLTP shown above, the government is also ploughing billions from general taxation into the NZ Upgrade Programme, which is mostly funding new or wider roads like Penlink, Papakura-Drury, Tauranga Northern Link and Otaki to North of Levin.

Yet to many even this vast expenditure on more and wider roads is not enough, despite decades of proof that more and wider roads won’t actually help fix congestion. For example, a recent newsletter from the AA pushes hard for even more spending on this failed strategy:

It is clear that a significant rebalancing of the transport programme is required, in the form of a much greater focus on improving conditions for general traffic. That would entail scaling up and bringing forward:

• New road projects on the periphery of the city (in particular, around high-growth areas)
• Targeted widening on sections of the motorway network
• Small adjustments (such as dynamic traffic lights, peak-period clearways and re-configuring lanes at chokepoints) right across the network

Reinstating Mill Road, and Stage Two of the Papakura to Drury South motorway widening are essential.

There is no logic to continuing to spend billions of dollars on solutions that have been proven over and over again to not work. So why on earth does this still happen? The article suggests a number of reasons.

Firstly, there is very little accountability in place to actually properly assess whether past investments actually achieved what they set out to do, and even fewer ways that these lessons get applied to future projects.

Part of the problem is a lack of accountability, says Beth Osborne, director of the advocacy group Transportation for America. The federal government doesn’t penalize states for getting their congestion mitigation estimates wrong, as TxDOT did in spectacular fashion with Houston’s Katy Freeway, widened in 2011 to as many as 26 lanes at a cost of $2.8 billion, half of which came from federal funds. The next year, an article in the Houston Chronicle declared the project a success: “What was once a daylong traffic jam is now for the most part smooth sailing.”

But by 2014, most peak-hour commutes on the Katy took even longer than they had before the expansion.

Federal inaction “allows TxDOT to find no induced demand in their project,” Osborne says, “even though their last 25 projects didn’t work very well because of it.” TxDOT’s website currently forecasts travel time savings of up to 84% from its $7 billion proposal to expand I-45 in Houston, which many local residents and officials oppose. (TxDOT did not respond to a request for comment.)

Matt Hardy, the program director for planning and performance management at the American Association of State Highway and Transportation Officials (AASHTO), agrees on the need to look at historical outcomes. “We don’t go back very much and see if the project provided the benefits that were expected,” he says. “I wish we did.”

Over the past 20 years huge parts of Auckland’s motorway network have been widened – most of the Northern Motorway north of Akoranga, almost all the Northwestern Motorway, the Southern Motorway through spaghetti junction and then from Otahuhu down to Papakura (soon to be Drury). Yet before Covid-19 these motorways were as jammed up as ever. Even massive projects like the Western Ring Route and the Waterview Connection, delivered only a relatively short amount of relief and again were starting to fill up again before the most recent lockdowns. But there’s no accountability for this, and barely even any monitoring of how successful (or otherwise) projects have been. Waka Kotahi stopped even bothering to undertake post-implementation reviews in August last year.

Secondly, there are a lot of vested interests in wanting to ignore induced demand. In New Zealand, there is a tight relationship between the motor vehicle and freight lobbies and transport policymakers, which undermines evidence-informed public policy.

Whole organisations – state departments of transport in the USA, Waka Kotahi and to a lesser extent Auckland Transport and other councils in NZ – have a huge interest in pushing to continue to build big roads that encourage driving, which generates more revenue that can help fund the next generation of projects.

Gas taxes further distort decision-making, because collected revenues often go straight to state departments of transportation — just as they did 90 years ago. By implication, an initiative that reduces driving (such as a transit expansion) could result in a lower state DOT budget, while one that induces more driving could lead to a bigger one — even if thicker traffic means that drivers themselves don’t benefit.

Eric Sundquist advised state DOTs on strategic planning for a decade before recently becoming an advisor to Caltrans, the state transportation department of California. “I remember working with one Midwestern state DOT director who showed me his dashboard, which included a measure for vehicle miles traveled,” Sundquist says. “The state’s goal was clearly more VMT. When I asked why, I was told that more VMT would provide more revenue to maintain the state system.”

Such an attitude does not surprise Jose Gomez-Ibanez, a professor emeritus at the Harvard Kennedy School, who has studied transportation funding for decades. “States get rewarded for ignoring induced demand,” he says. “There’s a lot of self-interest involved.”

Waka Kotahi’s revenue mostly comes from fuel taxes and road user charges, which literally means that reducing travel and fossil fuel use – essential to tackling climate change – undermines that funding stream. Even if there are many well-meaning people in Waka Kotahi, this is a really bad incentive structure for an organisation that needs to play a critical role in transforming our transport system over the coming years.

Thirdly, and perhaps most importantly, induced demand is a bit counter-intuitive. It also takes a while to kick in, which means that the big new project appears to have been successful initially. There are also lots of hypothetical ‘counterfactuals’ about what might have happened without the project which are never truly possible to know.

“The whole notion of induced demand is a little counterintuitive,” says Sundquist. “Highway building seems like a straightforward thing to do. And it does make cars go faster — for a little while.”

Caskey agrees. “I understand that if someone who drives everywhere sees traffic congestion, their immediate solution is to keep paving things. It’s sort of a natural reaction.”

That makes the topic of induced demand a challenging one for policymakers. “Everyone with a driver’s license thinks they understand transportation,” says Rosenberg. Meanwhile, politically potent contractors, unions and automakers have an incentive to keep the public confused.

There are some positive signs in recent times that key decision-makers understand how induced demand makes building new and wider roads to fix congestion futile. The balance of investment is slowly but surely shifting towards focusing more on projects that actually reduce vehicle travel demand through mode shift, and we have actually seen major roading projects like Mill Road and East West Link cancelled without much of a public outcry. Yet in other ways it still seems we have quite a lot way to go – especially when it comes to the more ad hoc transport decision-making governments appear to increasingly be making, like the NZ Upgrade Programme. Despite decades of evidence to the contrary from around the world, it seems that many people still think that building more and wider roads will actually solve congestion.

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