If a 10% increase in capacity within a few years creates a 10% increase in utilization, then that means there is essentially boundless long term demand for the road at that level of traffic.
If that is true, and the marginal car does not much change the traffic situation, why isn’t there boundless demand for the road with slightly worse traffic, increasing congestion now?
There’s a good explanation here.
Let’s say a highway gets moderate or heavy traffic at rush hour. Anyone who’ll tolerate extreme or heavy traffic will take their trips. People who’ll tolerate moderate traffic but not heavy traffic randomly decide whether to take their trip or not, in proportion to how likely the highway is to have moderate traffic. They’ll fill up the highway to the point that it’s roughly 0 expected value relative to their next-best option whether or not to take the trip at all.
If the highway gets expanded, more of these people will randomly decide to take trips, so the highway stays about as heavily trafficked as before. But the extra trip-takers are still getting roughly 0 expected value for taking the trip, there’s just more people taking these barely-worth-it trips.
Since the cost of road construction’s funded by taxpayers, these drivers aren’t even paying the full cost of their barely-worth-it trip. If they had to pay that cost, the trips would probably have net negative value for those drivers.
So induced demand is specifically inducing via a taxpayer subsidy more “barely worth it” behavior on the part of drivers, which seems incredibly wasteful. And this wastefulness increases no matter how much bigger you make the highway unless you can actually make it get less traffic during rush hour, not just more trips.
Now, we might consider that people taking trips usually has a positive social value. Maybe these drivers are visiting friends, for example. So even though the trip to see the friends is stressful because of traffic, the friends get a substantial benefit. That would be an argument for funding road expansion despite induced demand eliminating ~all the benefit for the drivers themselves.
There’s a good explanation here.
Let’s say a highway gets moderate or heavy traffic at rush hour. Anyone who’ll tolerate extreme or heavy traffic will take their trips. People who’ll tolerate moderate traffic but not heavy traffic randomly decide whether to take their trip or not, in proportion to how likely the highway is to have moderate traffic. They’ll fill up the highway to the point that it’s roughly 0 expected value relative to their next-best option whether or not to take the trip at all.
If the highway gets expanded, more of these people will randomly decide to take trips, so the highway stays about as heavily trafficked as before. But the extra trip-takers are still getting roughly 0 expected value for taking the trip, there’s just more people taking these barely-worth-it trips.
Since the cost of road construction’s funded by taxpayers, these drivers aren’t even paying the full cost of their barely-worth-it trip. If they had to pay that cost, the trips would probably have net negative value for those drivers.
So induced demand is specifically inducing via a taxpayer subsidy more “barely worth it” behavior on the part of drivers, which seems incredibly wasteful. And this wastefulness increases no matter how much bigger you make the highway unless you can actually make it get less traffic during rush hour, not just more trips.
Now, we might consider that people taking trips usually has a positive social value. Maybe these drivers are visiting friends, for example. So even though the trip to see the friends is stressful because of traffic, the friends get a substantial benefit. That would be an argument for funding road expansion despite induced demand eliminating ~all the benefit for the drivers themselves.