Research and discussion for citizens and decision makers

Eric Dumbaugh

The economics of traffic

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With a few notable exceptions, transportation planning practice in the United States is focused on managing or eliminating traffic congestion. Regardless of whether planners are advocating for highway infrastructure to improve level-of-service, or transit projects intended to “get cars off the road,” the underlying assumption is that congestion relief is an unmitigated good.

Such arguments are often based on the idea that traffic congestion and vehicle delay are bad for the economy. According to the Texas Transportation Institute, vehicle delay costs Americans $115 billion in wasted fuel and time each year. The common interpretation of such statistics is that our cities and regions would be so much more economically productive if only we could eliminate the congestion that occurs on urban streets.

But this begs the question: is traffic congestion really a drag on the economy? Economies are measured not in terms of vehicle delay or the amount of travel that people do, but in terms of the dollar value of the goods and services that they produce. If it is true that congestion is detrimental to a region’s economy, then one would expect that people living in areas with low levels of traffic congestion would be more economically productive, on a per capita basis, than those in areas with high levels of congestion.

This is a testable assertion. With the help of my research assistant Wenhao Li, I sought to determine whether vehicle delay had a negative effect on urban economies. I combined TTI’s data on traffic delay per capita with estimates of regional GDP per capita, acquired from the U.S. Bureau of Economic Analysis. I used 2010 data for both variables, converted them to their natural logs, and modeled them using regression analysis.

And what did I find? As per capita delay went up, so did GDP per capita. Every 10 percent increase in traffic delay per person was associated with a 3.4 percent increase in per capita GDP. For those interested in statistics, the relationship was significant at the 0.000 level, and the model had an R2 of 0.375. In layman’s terms, this was statistically-meaningful relationship.

Such a finding seems counterintuitive on its surface. How could being stuck in traffic lead people to be more productive? The relationship is almost certainly not causal. Instead, regional GDP and traffic congestion are tied to a common moderating variable - the presence of a vibrant, economically-productive city. And as city economies grow, so too does the demand for travel. People travel for work and meetings, for shopping and recreation. They produce and demand goods and services, which further increases travel demand. And when the streets become congested and driving inconvenient, people move to more accessible areas, rebuild at higher densities, travel shorter distances, and shift travel modes.

Stated another way, people adapt to congested environments. Because cities provide greater access to job opportunities than do rural areas, as well as wages that are more than 30 percent higher than their non-metropolitan counterparts they have a powerful economic incentive to do so.

Fortunately for our cities and their economies, urban environments are precisely what is sought by the millennial generation. 88 percent of millennials report that they would prefer to live in urban environments, and they are already driving less and riding transit more than their Gen X and boomer counterparts. Indeed, many millennials view driving as a vice, with 55 percent indicating that they have made a deliberate effort to reduce the amount of driving that they do. They are also leading a surge in cycling in cities like Seattle, Minneapolis, Denver, and Washington, D.C., all of which have seen their share of bike commuting double over the last decade. These trends are of great concern to the auto industry.

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Full Story: Rethinking the economics of traffic congestion
Source: The Atlantic Cities, June 1, 2012

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