Saturday, October 28, 2017

Assessing a Critique of Induced Demand

On a post the other day about induced demand on a City Council FB discussion group, a commenter dropped a flurry of links critical of "the myth of induced demand." Mostly they were not very useful, alas.

But one of them was a little more interesting. (Though in a narrow way. This will be more like an extended footnote, and may be more boring than usual!) A post at a Libertarian think tank, "Debunking the Induced-Demand Myth" is worth a closer reading.

It is written by someone generally critical of bikes and transit, who is all about cars, car, and more cars. So that set of prior commitments is a bit of a flag. Still, the piece appeared to represent a serious pass at criticism of induced demand.

In the end, it was hampered by its implied audience: It did not seem to be written to persuade people who advocate for the reality of induced demand, but instead seemed to be written to reassure people who already know induced demand is a myth. It was more preaching to the choir than even-handed assessment, and therefore did not fully engage the argument for induced demand. So it was not persuasive.

Common Ground

But first, instead of immediately trying to debunk the debunker, let's consider common ground. The conclusion, actually, is consistent what what we argue here:
If congestion is the issue, then...the solution is congestion pricing....That’s why I support, not new road construction, but better road pricing.
Libertarian-conservatives should support decongestion pricing. There should totally be a "green tea," left-right, whatever you want to call it, coalition in favor of better pricing for road use. Congestion and pollution arise from a market failure because we overuse and misallocate a "free" good, unpriced access to roads. Though we all might have different ends in mind, at the moment there should be broad agreement just now about means, about instituting better pricing and creating a better functioning market for access to road space.*

("Decongestion pricing" seems like a better term because the goal of the pricing is decongestion.)

Over-use of a free resource = market failure
Libertarian-conservatives should support road pricing
via Twitter
Back to Induced Demand

So what about "induced demand"?

The piece is in response to a Wired Magazine piece, and most of that criticism we can ignore. The Wired journalist simplified and it not helpful to point out the ways that journalist misunderstood or misrepresented things. That's a straw man. For our purposes, the important part of the piece is rather a critique of the prior work on which the article draws, the foundational paper, "The Fundamental Law of Road Congestion."

About that paper, the Libertarian critic says
I have a serious problem with this result [in Duranton and Turner], mainly because my analysis of driving and highway capacity data for the 101 largest urban areas from 1982 through 2011 produces very different results. Yes, there is a correlation between an increase in road capacity and an increase in driving. But the correlation is far from perfect and it is very far from one-to-one.

Looking at the same years as Duranton & Turner, in more than 90 percent of urban areas, driving grew far faster than lane miles. On average, driving grew more than twice as fast as lane miles. But in Boston between 1983 and 1993, freeway capacities grew by less than 1 percent, while driving grew by more than 35 percent. In Madison, capacities grew by 35 percent, while driving grew by less than 20 percent. The wide range in differences between urban areas suggests that, not only are Duranton & Turner’s elasticities wrong, their standard errors are far too low. (You can check my results by downloading Texas Transportation Institute data for 101 urban areas.)
As I read it, this is routine quibbling with details on a pioneering study. "Yes, there is a correlation between an increase in road capacity and an increase in driving. But the correlation is far from perfect." It is not surprising the correlation is far from perfect. Pioneering studies are routinely wrong in minor details and require refinement as others iterate on the study, gather larger data sets, investigate smaller data sets in more detail, or develop better models. On foundational studies, later researchers clean up the details and affirm the bigger picture.

In any case, to say "yes there is a correlation...but it's not perfect" is quibbling with the details, and tends to affirm the larger conclusion. I do not read this part of the argument as disturbing "the bigger picture" in any important way.

The criticism of Duranton and Turner here is not a debunking, then, but is part of the normal debate that goes on in refinement. It's very likely that Duranton and Turner's model is not quite right and that someone will find better ways to model induced demand. But that doesn't dismiss the general notion of demand induced by new construction. Here we do not need to know any exact "coefficient of induced demand" or any other such mathematical precision. All we need is the general effect: Building more road capacity leads to more driving.

Close to an Objective Standpoint?

Even if objectivity is an impossible ideal, a peer-reviewed article in the American Economic Review, not known for any socialist or kumbaya tendencies, is much closer to objective than the Texas Transportation Institute or a Libertarian think tank. Remember, in the AER paper they also claimed transit didn't really help congestion. If they were biased for eco/lefty solutions, they would have boosted transit more. In fact, it's hard to imagine a publication source for this kind of paper on congestion that could be regarded as more objective than the AER.

The writer's own "analysis of driving and highway capacity data for the 101 largest urban areas from 1982 through 2011" was not peer-reviewed and on that basis alone should be given less weight. It may not even be sufficiently robust to constitute a minor set of corrections or adjustment. It might just be totally idiosyncratic and hopelessly slanted.

Indeed, the Texas Transportation Institute is known for its own questionable methods. You may recall a presentation to the MPO on the TTI's "Urban Mobility Scorecard" in which "on both highways and arterial roads, 'free-flow speeds' are often 10, 20, maybe even 30mph over the posted speed limit." The TTI is big on the autoist fantasy of high-speed, free-flowing traffic, both in and out of cities. Crucially, this fantasy involves speeding we have deemed illegal.

Any criticism of "induced demand" that draws on the TTI is highly motivated and itself far from objective.

At the present moment then, the best available information supports "induced demand" and this article, "The Fundamental Law of Road Congestion," remains the nearest thing we have to an objective investigation of it. (For example, two refinements we have cited here come from California agencies working on pollution or sustainability. These agencies are probably more biased than the American Economic Review. But they didn't originate the study. They were extending it.)

Apologetics of Autoism

So if the Libertarian article is not actually a debunking of induced demand, what is it? At the end it grants many of the points about induced demand:
So Duranton & Turner’s numbers appear to be wrong [in detail perhaps], and Wired overstated those numbers anyway [probably true]. But let’s say it were true that there is a perfect one-to-one relationship between driving and highway capacity, and further stipulate that increasing capacity leads to increased driving (rather than the other way around, which is equally credible if highway engineers are trying to keep up with demand). Is that a bad thing?
The thrust of the piece is not so much to debunk induced demand, which it was not able to do, as to argue that cars, cars, and more cars is a terrific thing:
We know that every car on the road has someone in it who is going somewhere that is important to them. Increasing the number of cars on the road means more people are getting to do things that are important to them. Provided we aren’t subsidizing that travel..., then increasing highway capacity leads to net economic benefits because it generates travel that wouldn’t have taken place otherwise.

By comparison, building expensive transit systems aimed at getting people out of their less-expensive cars generates zero economic benefits if it generates no new travel. Only new travel generates economic benefits, so people who argue that new roads induce new travel are actually arguing that new roads create economic benefits.
There is no reckoning with the externalities: particulate and greenhouse gas pollution, roadway deaths and serious injury, sedentary lifestyles, parking lots, governmental maintenance obligations, etc.

That is not a debunking of induced demand, it is an apology for autoism. And the audience for the piece is not a body of neutral observers who are interested in determining whether the concept of induced demand accurately describes our patterns of driving and our current autoist reality; the audience is instead the body of people who already know induced demand is "false," that transit is a horrible investment, and who want reassurance for all this and for their autoism. This is preaching to the choir and affirmation of prior commitments more than even-handed investigation.

It turns out this is not an effective criticism of induced demand, and the general notion of induced demand seems secure for the moment.

* Just to cut off this argument, at some future point, when bike travel is orders of magnitude more popular, on bike lanes we could face "over use of a free resource."  At that time it will be appropriate to talk about a correction and about road pricing for bikes or bike users. Until then, the appropriate policy is to encourage bike travel. As one economist has said:
[T]he appropriate public policy is to subsidize bikes, not tax them.

Why? The negative externalities associated with bike riding: virtually none. Minimal wear and tear on roads, sometimes a slight slowdown in traffic and a extra line of paint for a bike lane. Positive externalities associated with bike riding: lots. Reduced congestion and emissions from those that bike in lieu of taking a car, and better health and fitness of riders reducing the toll on the public health system. Public economic teaches us that to get an efficient amount of economic activity that has externalities you have to get the price to reflect the true cost of the activity. In this case the true cost is less than the price of a bike. [Italics added]

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