Re:Tunnel Boring Machines (2018)
by theptip on Monday November 18, 2019 @12:15PM
(#21566048)
I recently heard an economist make a point about induced demand which I found interesting.
While it's true that building more roads doesn't always reduce traffic, the bit that most people miss is that even if induced demand fills up the new capacity, in the new equilibrium more people are able to use the road, so there's more utility being gained.
Put another way, at the margin there's a lot of latent demand that is unfilled. If you were to keep building roads, then at some point you'd meet all of that latent demand and traffic would go down. The fact that increasing supply also increases demand is not necessarily an argument against building more capacity; you could actually use it as an argument _for_ building a lot more roads.
(Of course, without dynamic pricing it's really hard to figure out whether it's actually worth building more capacity; you could build a new road at a shared cost of $100 per new driver per month, when they would only choose pay up to $10 per month to drive instead of do what they did before. Dynamic pricing models tend to be unpopular though, particularly as they can be construed as a regressive tax-like burden.)
While it's true that building more roads doesn't always reduce traffic, the bit that most people miss is that even if induced demand fills up the new capacity, in the new equilibrium more people are able to use the road, so there's more utility being gained.
Put another way, at the margin there's a lot of latent demand that is unfilled. If you were to keep building roads, then at some point you'd meet all of that latent demand and traffic would go down. The fact that increasing supply also increases demand is not necessarily an argument against building more capacity; you could actually use it as an argument _for_ building a lot more roads.
(Of course, without dynamic pricing it's really hard to figure out whether it's actually worth building more capacity; you could build a new road at a shared cost of $100 per new driver per month, when they would only choose pay up to $10 per month to drive instead of do what they did before. Dynamic pricing models tend to be unpopular though, particularly as they can be construed as a regressive tax-like burden.)