Speculative Hypothesis: Planners’ discount rates are too low

When we are children, we learn the fable of the ant and the grasshopper. Briefly, the ant saves food for winter, the grasshopper doesn’t, and instead goes clubbing. The ant survives, the grasshopper doesn’t. Moral lesson: plan for the future, food isn’t as plentiful in the winter.

Dancing Grasshopper. Source: http://srujanakktrip.blogspot.com/2011/09/ant-and-grasshopper.html
Dancing Grasshopper. Source:

And certainly we should all plan to some extent. Today the personal economic issue is retirement, and many people don’t save enough in the US to live as well as they might like upon ceasing full-time work. This is in part because they lived too well while they were working instead of deferring pleasure.

But there is the opposite view, which is that of “live for today, for tomorrow we may all be dead”. Saving for the future does you no good if you have no future. The earth might be destroyed by an asteroid (think about the poor dinosaurs who spent their lives saving and instead of clubbing, where did that get them?). Or we might destroy ourselves (when I was a child, the boogey-man was Nuclear War, then Nuclear Winter, then Acid Rain, then the Ozone Hole, now Global Warming … there is always a boogey-man). Or our society might be undermined by an outside threat: Emmanuel Goldstein, Osama bin Laden, Abu Abdullah al-Rashid al-Baghdadi.

So how much to save depends on the likelihood of survival and persistence. If I expect to live, or at least be able to transfer my wealth to descendants, my motivation for savings is higher. If I expect to die, or have my assets seized, or depreciated in a major round of hyperinflation, really what is the point?

People engaged in the planning field have by their very nature a longer time-horizon than random. They are looking at public works that will take decades to get built (and years to build), and last many more decades if not centuries.

Forecasts predicting gloom and doom (the scare forecast) (too much congestion on a map painted red) far into the future are “bringing distant dangers near”. We have no reason to plan for tomorrow’s possible problems when we have plenty of problems staring us in the face

From a financial economic perspective, it is often unwise to make these long-term speculative investments, or even plan to make these investments, their payback period is too long, the technology may change in the interim. Resources could be better allocated to things which can be made, and innovated, in a much shorter time horizon. The modern version of capitalism ruthlessly (eventually) punishes these investments.

Though I don’t think a formal study has been done, much of the private capital invested in transportation infrastructure historically has been  wiped out [there are many reasons for this, not all of which are market related, some due to regulation], which is why such investments have most recently been mostly left to the public sector. (And recent examples of private infrastructure investment have been nothing to write home about: Dulles Greenway, Indiana Toll Road, the Channel Tunnel, the London Underground are just a few of the high profile disasters.) At a minimum, getting this right is hard.

The discount rate is how we discount future money back to the present, it  the interest rate you earn on investments looked at from the other direction. Are you indifferent to $1.00 today or $1.10 a year from now. Then your discount rate is 10%. The planner’s discount rate asymptotically approaches 0%.

Robin Hanson at Overcoming Bias makes an interesting distinction between “far” and “near” modes of thinking. We are more idealistic in “far” mode. While almost everyone operates in both modes some of the time, some people operate in one mode more often. Hanson points out that “Disagreement is Far“, himself quoting:

Recruiting a sample of Americans via the internet, they polled participants on a set of contentious US policy issues, such as imposing sanctions on Iran, healthcare and approaches to carbon emissions. One group was asked to give their opinion and then provide reasons for why they held that view. This group got the opportunity to put their side of the issue, in the same way anyone in an argument or debate has a chance to argue their case.

Those in the second group did something subtly different. Rather that provide reasons, they were asked to explain how the policy they were advocating would work. They were asked to trace, step by step, from start to finish, the causal path from the policy to the effects it was supposed to have.

The results were clear. People who provided reasons remained as convinced of their positions as they had been before the experiment. Those who were asked to provide explanations softened their views, and reported a correspondingly larger drop in how they rated their understanding of the issues. (morepaper; HT Elliot Olds)


Long Range Transportation Planners in practice seldom lay out actual deployment paths, and instead focus on the end state, a vision, a 30-year plan.  A different set of people (or sometimes the same people in a different set of roles) put together a 6-year Capital Improvement Plan. A third set of people deals with annual budgets. A fourth set operationalizes that. A fifth set actual builds and delivers the projects.

As the wise show Parks and Recreation said “There are no planning emergencies”. With the attitude in contrast to most people who live in the now and with urgency, who spend their lives metaphorically if not actually “fighting fires”, it is no wonder that planners cannot meet deadlines. In their worldview, there are no deadlines.

Rising gas prices might make us safer

Tim Harlow at the Star Tribune Drive column reports on our research. Rising gas prices might make us safer

Death, prices correlated

Researcher Guangqing Chi of the Department of Sociology and Rural Studies at South Dakota State University looked at the correlation between gas prices and traffic safety. In a study examining crash data in Minnesota from 1998 to 2007, Chi found that a 20-cent drop in gas prices resulted in 15 more fatalities a year. Conversely, he found that a 20-cent increase would bring a decrease of 15 deaths annually.

The study also found that as gas prices rise, the crash rate per million miles traveled dropped in urban and rural areas. It found higher gasoline prices also have significant effects in reducing property damage and injury crashes.

In another study using data from Alabama and Mississippi, Chi found higher gas prices had the biggest effect on teens. With their lower incomes, teens are discouraged from driving by high gas prices and that reduces their crash rate. That makes the roads safer for other drivers, he said.

When fuel prices skyrocketed to more than $4 a gallon in 2008, many drivers drove less frequently and perhaps less aggressively, which reduced their chances of having a crash, the study said.

The bottom line is that when gas prices go up, “we suspect that people drive more carefully,” Chi said.

Read the paper here: Chi, Guangchi, Mohammed Quddus, Arthur Huang and David Levinson (2013) Gasoline Price Effects on Traffic Safety in Urban and Rural Areas: Evidence from Minnesota, 1998–2007. Safety Science 59: pp. 154-162

Stochastic Congestion and Pricing Model with Endogenous Departure Time Selection and Heterogeneous Travelers

Recently published:

  • Xin, Wuping and David Levinson (2015) Stochastic Congestion and Pricing Model with Endogenous Departure Time Selection and Heterogeneous Travelers. Mathematical Population Studies. Volume 22, Issue 1, 2015, pages 37- 52
    Published online: 11 Feb 2015 [doi] [Paywall, but free copy here] [This is part of a special issue on Risk and Uncertainty in Urban and Transport Economics]

    Abstract: In a stochastic roadway congestion and pricing model, one scheme (omniscient pricing) relies on the full knowledge of each individual journey cost and of early and late penalties of the traveler. A second scheme (observable pricing) is based on observed queuing delays only. Travelers are characterized by late-acceptance levels. The effects of various late-acceptance levels on congestion patterns with and without pricing are compared through simulations. The omniscient pricing scheme is most effective in suppressing the congestion at peak hours and in distributing travel demands over a longer time horizon. Heterogeneity of travelers reduces congestion when pricing is imposed, and congestion pricing becomes more effective when cost structures are diversified rather than identical. Omniscient pricing better reduces the expected total social cost; however, more travelers improve welfare individually with observable pricing. The benefits of a pricing scheme depend on travelers’ cost structures and on the proportion of late-tolerant, late-averse, and late-neutral travelers in the population.

    Keywords: commute, congestion pricing, omniscient and observable pricing schemes, road pricing, second-best pricing, social cost and individual welfare, stochastic network equilibrium, traveler departure patterns

(Personal note. This paper was first submitted in 2005. Revised and accepted in 2007, and published in 2015. Sadly this tops my previous record for the longest a paper has taken, which had gone to Ramp Metering and Freeway Bottleneck Capacity at 7 years.  My thanks to my co-author for his infinite patience. However, this is theory, rather than empirical, and so we have not been trumped by other research.)

Elements of Access: Constant Travel Time Budgets?

By Kay Axhausen

Travel time [h] in England and Wales since 1970. Source: Metz (2008) p. 323
Travel time [h] in England and Wales since 1970. Source: Metz (2008) p. 323
One of the most famous claims made about travel behavior is that the time spent on it is constant over the years (Zahavi, 1974). This a claim made for whole populations not individuals, where personal introspection and observation tells us, that the time spent changes with age, family responsibilities, new workplaces or homes. It is a claim made for regular daily travel, i.e. that happening in the usual environment of the traveller. See the Figure for an example of this observation.

Zahavi (1974), and all those in his tradition, base this claim on a striking similarity of the reported numbers for total daily travel time in local, regional and national travel diary surveys (e.g. Schäfer and Victor, 2000 or Metz, 2008). Originally a figure of 60 min was proposed, but this has crept up over the years; About 100 daily minutes are reported in Switzerland for example.

The claim is powerful, when linked to Downs’ (“law of peak-hour-expressway congestion” or triple convergence (discussed in Downs, 2004), which observes correctly that travellers will respond to changes in the transport system by changing their behavior until they cannot find a way to improve their situation further. The changes can be caused by travellers improving their daily schedule (leaving or arriving earlier), by them changing to a more attractive mode, by them switching the work place or the residential location for something better or by them doing things more often out-of-home: meeting friends, attending civic meetings or coming along to one’s child sport events.

The investment in the transport system will have generated first travel time savings, but in longer term these were converted into other things: the seeming paradox or law of peak hour congestion. You can say the investment was in vain, when you look only at time use or motorway speeds, and argue that all investment is pointless (e.g. Metz, 2008, although he is not quite as radical as the political discussion), or you can ask, if these long term changes aren’t indicators that the population can now live better by using the new capacity to do things they want to do when, where and how they want to do them.

Next to political assessment is the empirical question, if all of the change is converted into longer travel. If taken seriously the constant travel time budget implies an elasticity of minus one of travel distance with respect to changes in travel time (speed). Only then can  the budget stay constant.

There is some work on this in the context of the ‘induced demand’ discussion (e.g. Cervero and Hansen, 2002 or Weis and Axhausen, 2009), but not nearly as much, as the size of the claim would justify. All of the existing work indicates that the elasticity is large, but not nearly one. This tells us, that some of the gains remain in the transport system, mostly as better daily schedules for travellers.


Cervero, R. and M. Hansen (2002) Induced travel demand and induced road investment, A simultaneous equation analysis, Journal of Transport and Policy, 36 (3) 469-490.

Downs, A. (2004) Still Stuck in Traffic, Brookings Institution, Washington D.C.

Metz, D. (2008) The myth of travel time saving, Transport Reviews, 28 (3) 321-336.

Bundesamt für Statistik and Bundesamt für Raumentwicklung (2012), Mobilität in der Schweiz, Ergebnisse des Mikrozensus Mobilität und Verkehr 2010, Neuchâtel and Bern

Schäfer, A. and D.G. Victor (2000) The future mobility of the world population, Transportation Research A, 34 (3) 171-205.

Weis, C. and K.W. Axhausen (2009) Induced travel demand: Evidence from a pseudo panel data based structural equations model, Research in Transport Economics, 25, 8-18.

Zahavi, Y. (1974) Travel Time Budgets and Mobility in Urban Areas, final report FHWA PL 8183, Federal Highway Administration, US Department of Transportation, Washington, D.C.

St. Cloud Winter Institute

I am participating in the St. Cloud Winter Institute on February 19. Details of the program are below.

Wednesday, February 18th
5 – 6:30 Economic OutlookLaura Kalambokidis
6:30 – 8 Reception & Entertainment by the Andrew Walesch Band
Thursday, February 19th
8 – 9 Registration and Breakfast
9 – 10:15 First Session (See below)
10:30 – 11:45 Second Session (See below)
12 – 1:30 Lunch and Chamber Panel“Central Minnesota Job Creators– What They Do, How They Do It

Jeff Haviland, President, Seitz Stainless

Jim Hill, Director of Human Resources, Columbia Gear Corporation

Lynn Mosely, Director of Human Resources, Electrolux Major Appliances North America

Bob Sexton, CEO, C4 Welding

2 – 3 Keynote Speaker: David LevinsonThe Transportation Experience: From Steamboats to Streetcars.“The talk explores the historical evolution of transportation modes and technologies. It traces how systems are innovated, planned and adapted, deployed and expanded, and reach maturity, where they may either be maintained in a polished obsolesce often propped up by subsidies, be displaced by competitors, or be reorganized and renewed. An array of examples supports the idea that modern policies are built from past experiences. The planning (and control) of nonlinear, unstable processes is today’s central transportation problem, and that this is universal and true of all modes.
3 – 4 Q & A Session/Closing


Thursday, February 19th Sessions
K-12 Teaching Track Community Engagement Track Public Policy Research Track
9:00 – 10:15 a.m. Railroads, Roads, and Apple Pie – Transportation in Children’s LiteratureScott Wolla, Federal Reserve Bank of St. Louis “Effects of the Minimum Wage Law on St. Cloud Businesses”Larry Logeman, Executive Express Transportation, Planning and Public Policy in Minnesota“Robert Helland, SCSU AlumnusJohn Uphoff, SCSU Alumnus

Pierre Callies, Graduate Student, Department of Geography

10:30 – 11:45 a.m. Earning CreditMartha Rush, Moundsview High SchoolEmily Anderson, Blaine High School Two-Way Communication: Outreach, Communication and Education Across the Ninth District of the Federal ReserveAngie Eilers, Federal Reserve Bank of Minneapolis “Equity and Urban Transportation: A Panel Discussion”Luis Estevez



The Saint Cloud Times reports: “Levinson, a leading exporter in transportation, will speak from 2-3 p.m. with an hourlong question-and-answer session to follow. Admission to this portion of the Winter Institute is free and open to the public.”

Travel behavior study shows drivers are spending less time traveling and more time at home

CTS Catalyst reports on our research: Travel behavior study shows drivers are spending less time traveling and more time at home

Something unprecedented has happened to Americans’ travel patterns. Even before the recent recession, total distance traveled per person had started to decline, and the rate of total vehicle travel had begun to steadily decrease as well.

In a new five-part series of research reports sponsored by the Minnesota Department of Transportation and the Metropolitan Council, U of M researchers are delving into a set of rich data encompassing more than four decades of travel behavior surveys to enable the region’s transportation planners to better understand how its residents make decisions about whether, when, where, and why to travel.

In the first study, researchers examined how changes in the accessibility of destinations—such as jobs, shopping, and leisure activities—have changed travel behavior in the past 20 years.

“We started with a detailed analysis of travel surveys conducted by the Metropolitan Council in 1990, 2000, and 2010,” says David Levinson, the study’s principal investigator and RP Braun/CTS Chair in the Department of Civil, Environmental, and Geo- Engineering. “We found that people are spending slightly less time in motion and more time at home. We also found that accessibility is a significant factor in determining not only travel behavior but overall time budgeting in general. In short, each person has to decide how they will use the time allotted to them each day, and many of those decisions are directly related to the transportation and land-use systems in place.”

A deeper look into the data sheds additional light on the relationship between accessibility and travel behavior. For example, trip durations for workers have gone up for all activities between 1990 and 2010. More noticeably, distances for trips have increased markedly: workers take jobs farther from their homes and shop farther from their homes. Travel speeds also increased for the average worker, due to more travel on faster suburban roadways that carry a larger share of all travel. In contrast, for non-workers, trip durations and overall travel time have gone down.

“Interestingly, although time, distance, and speed per trip has generally risen for workers, the number of those trips is declining,” Levinson says. “As a result, overall, fewer miles are being traveled and less time is being allocated to travel.”

Total time spent shopping also decreased for workers and for males, likely caused in part by an increase in online commerce. “The Internet has provided electronic accessibility, much as the transportation network has in the material world,” Levinson explains. “It helps to facilitate commerce, communication, education, and leisure. This may lead to a decreased need for people to travel, and account for more time spent at home.”

Jonathan Ehrlich, planning analyst with the Metropolitan Council, says the research “helps us get more value from our travel surveys and will aid in understanding how travel is changing, and what the risks are in the assumptions and models we use for planning and forecasting.”

The findings will prove useful not just for Twin Cities transportation planners but for planners and engineers worldwide. “Our models can be easily adapted to data from other cities or for other activities besides work,” Levinson says. “This creates an approach that can be used to gauge the impact of a transportation project from an accessibility standpoint and determine how that project will translate into time allocation.”

Other parts of the study will look at changes in telecommuting behavior over time, the effect of transit quality of service on people’s activity choices and time allocation, changes in travel behavior by age cohort, and analysis of bicycling and walking in light of land-use and transportation system changes. The Catalyst will feature coverage of these projects as they are completed.

Related Links

Better job accessibility drives MnPASS subscriptions

CTS Catalyst reports on our recent research: Better job accessibility drives MnPASS subscriptions


Photo: MnDOT

In recent years, many metropolitan-area highway systems have created high-occupancy toll (HOT) lanes. Typically, the use of these lanes is restricted during peak periods to carpools and those paying a toll for access, which commonly requires enrollment in an electronic tolling program and the use of an electronic transponder.

To better understand why drivers enroll in Minnesota’s MnPASS electronic tolling system, University of Minnesota researchers investigated the factors that drive subscriptions. Their findings indicate that households are more likely to have MnPASS subscriptions in areas where the MnPASS system provides a greater increase in accessibility to jobs.

“While there has been a great deal of research into what causes travelers to select a toll lane during a single trip, there is very little information available regarding the first decision a potential HOT lane user must make—the decision to enroll in an electronic tolling program and become an eligible HOT lane user,” says Andrew Owen, director of the U’s Accessibility Observatory.

The MnPASS system was created in 2005 with the opening of HOT lanes on I-394 west of downtown Minneapolis; in 2009, the system was expanded to include HOT lanes on I-35W south of downtown Minneapolis. During peak periods, the lanes are restricted to vehicles carrying two or more occupants and to travelers paying a toll that varies from $0.25 to $8.00 based on HOT lane utilization at the time. To use the HOT lanes, vehicles must enroll in the program online, by mail, or in person and pay $1.50 a month to carry a MnPASS transponder provided by the Minnesota Department of Transportation (MnDOT).

“Though enrolling in a HOT lane program is usually low-cost or free, it always requires some user expense in the form of time spent processing enrollment forms and managing accounts,” says Owen. “In addition, it involves some risk because there is typically a charge for lost or damaged transponders. Because of these costs and risks, it’s reasonable to expect people who would receive little or no benefit from the ability to use HOT lanes won’t enroll in the program, while a person who would receive a very large benefit would be very likely to enroll.”

To test this theory, researchers calculated the job accessibility benefit of the MnPASS system by determining the areas where using MnPASS HOT lanes would lead to the greatest increase of jobs reachable with a commute of 30 minutes or less. They found that the areas with the highest concentrations of MnPASS-holding households—the western and southern suburbs of the metro area—were also the areas where the MnPASS system provided the greatest accessibility benefit.

“These findings will serve as a useful tool for transportation planners as they work to determine where to implement HOT lanes in the future,” says Owen. “By evaluating the incremental job accessibility benefits created by a planned HOT lane, planners can more effectively model participation in toll lane programs and more accurately weigh the costs and benefits of creating new HOT lanes.”

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