Category Archives: induced demand

On “Induced Demand”

 

JW Writes:

I strongly agree with David King’s recent post that we so often forget accumulated knowledge and that we seem to re-discover this knowledge in endless cycles. Nowhere does this seem more true than in the field of economics, which brings me to the reason I reacted so strongly to David’s post.

I hate the term “Induced Demand”. I hate the idea that induced demand is something bad; something to be avoided.

In economics 101 we learn that demand is a function – not an amount. It is presented to us as a two-dimensional function. To make the math easy, it is then reduced to a one dimensional (linear) function so we can calculate elasticity and solve problems. In fact, demand is a three dimensional function, with time parameters, and is not a zero dimensionless point.

We only arrive at an amount (of travel) when we intersect the supply function with the demand function. Transportation improvements, whether the construction of a new runway at an airport or the signal coordination along an urban arterial, change the supply function, and therefore the amount of travel consumed, and the price.

When we consume travel, we are actually consuming something else. It is instructive to think in terms of David Levinson’s formulation of “access” instead of travel. Access is a Merit Good. Merit goods are what most people think of when they talk about Public Goods, without the messiness of concerning ourselves with rivalry and excludability. Merit goods are normally associated with positive externalities; and as such are considered to be something that individuals or societies should have on the basis of need; and something that will be under-supplied by the market, making public provision desirable.

From the individual’s point of view, access provides opportunities to more jobs, more entertainment and social options, and more alternatives for consumption of goods and services. From a business’ point of view, access provides a larger pool of labor and more raw materials. From a retailer’s point of view, access provides a larger pool of consumers. From a municipal government’s point of view, access allows more efficient provision of police protection, fire protection and ambulance service by reducing the number of facilities necessary for a given response time.

Transportation improvements that provide greater access per unit of time lower transaction costs. Lower transaction cost lead to great efficiency in the economy and a higher standard of living.

In telecommunications networks we have witnessed several orders of magnitude improvement in capacity during our lifetimes, yet we have always filled the new capacity. We stream video now when we used send text files. Yet no one wrings their hands about the induced demand in our telecommunications network.

Induced model complexity

When I was a naive young modeler, running the Travel and Travel/2 models for the Montgomery County Planning Departments, regional travel demand models took up to 24 hours to run in full form. Talking with modelers today, it seems models still take on the order of 24 hours to run. Why?

I posit “Induced Complexity.” When we build a road, we induce demand, travelers who were previously priced off the road due to congestion or extra travel time now switch times of day, routes, modes, and destinations to take advantage of the capacity, and new development is pursued. Similarly, when we get a bigger computer, we can either use it to run the same models faster, or to run more complicated models. It seems the profession leans to the latter. The complexity is in terms of the number of Transportation Analysis Zones, or in the number of Times of Day, or in the number of model components that are considered, or the degree of precision required in equilibrium.

This induced complexity is real, and like induced demand is not necessarily a bad thing (if the complexity improves accuracy, it is a good thing), but it is a thing we should all be cognizant of.

Do Trash Cans Induce Garbage?

From the San Francisco papers a while back, I saw a headline “”City rids streets of hundreds of garbage cans: Mayor says high number led to trash overflows””
An article about this: Trash cans cut back on city streets / Mayor defends policy but supervisors, residents complain
On its face, eliminating garbage cans will not eliminate garbage, so what is the mental model Mayor Newsom has?
(a) by increasing the transportation cost of disposal, people will create less waste? (The induced demand argument.
(b) people/businesses are free-riding on public trash receptacles, and that by cutting back, people will fund their own receptacles?
The question needs to be asked why were public trash receptacles initially deployed? One suspects public dumping of waste and littering were problems, otherwise a solution would never have been proposed. Public dumping and littering are not mere aesthetic issues, there is also a significant public health problem. To sustain a large population in a small area, waste must be managed.
The example of Amsterdam may be worth visiting. Receptacles there are port-holes into a much large waste storage dumpster under the ground that is cleared every morning by giant mechanical cleaning machines in a fascinating example of advanced technology for seemingly mundane uses. This applies to recycling as well.

Four pictures I took in Amsterdam of waste collection in 2003

Amsterdam 2003 - - 96-thumb Amsterdam 2003 - - 95-thumb Amsterdam 2003 - - 43-thumb Amsterdam 2003 - - 17-thumb
Pictures of recycling bins in Amsterdam from Pushpullbar forum
Some more pictures here:
Christelle: Another Dutch thing… Garbage!
and
Christelle: Another Dutch thing… Garbage part 2

The Co-Evolution of London’s Land Use and Transport

updated August 25, 2009:
For those of you who doubt I am doing work over in London, I have completed two other papers (in addition to “Too Expensive to Meter” based on my research over here):

  • Levinson, David (2008) The Orderliness Hypothesis: Does Population Density Explain the Sequence of Rail Station Opening in London? Journal of Transport History 29(1) March 2008 pp.98-114.[download]
  • Network growth is a complex phenomenon. Some have suggested that it occurs in an orderly or rational way, based on the size of the places that are connected. David Levinson examines the order in which stations were added to the London surface rail and Underground rail networks in the nineteenth and twentieth centuries, testing the extent to which order correlates with population density. While population density is an important factor in explaining order, he shows that other factors were at work. The network itself helps to reshape land uses, and a network that may have been well ordered at one time may drift away from order as activities relocate.

  • Levinson, David (2008) Density and Dispersion: The Co-Development of Land use and Rail in London. Journal of Economic Geography 8(1) 55-57.
    JEG: [doi]
  • This article examines the changes that occurred in the rail network and density of population in London during the 19th and 20th centuries. It aims to disentangle the ‘chicken and egg’ problem of which came first, network or land development, through a set of statistical analyses clearly distinguishing events by order. Using panel data representing the 33 boroughs of London over each decade from 1871 to 2001, the research finds that there is a positive feedback effect between population density and network density. Additional rail stations (either Underground or surface) are positive factors leading to subsequent increases in population in the suburbs of London, while additional population density is a factor in subsequently deploying more rail. These effects differ in central London, where the additional accessibility produced by rail led to commercial development and concomitant depopulation. There are also differences in the effects associated with surface rail stations and Underground stations, as the Underground was able to get into central London in a way that surface rail could not. However, the two networks were weak (and statistically insignificant) substitutes for each other in the suburbs, while the density of surface rail stations was a complement to the Underground in the center, though not vice versa.

Perhaps more interesting for the non-academic, we (Ahmed El-Geneidy, Feng Xie, and myself of the Nexus group) have put together three quicktime movies

  • 1.The co-evolution of London population density and surface (National) rail
  • 2.The co-evolution of London population density and the Underground
  • 3.The co-evolution of London population density and surface (National) rail and the Underground

These can be accessed from here.