Q&A with Matthew Turner on Road Congestion and Transportation Policy

It’s been another busy summer at PERC, with our summer fellowships bringing together an all-star cast of scholars to Montana to research topics relating to free market environmentalism. This week we continue our Q&A series with economist Matthew Turner, a leading expert on road congestion and transportation policy.

Matthew Turner is a 2012 PERC Julian Simon Fellow and professor of economics at the University of Toronto. His research focuses on the economics of land use and transportation. We thank Matthew for taking time to answer our questions. For more PERC Q&As, visit the series archive.

Q:  At your latest PERC workshop you presented new research, co-authored with Victor Couture and Gilles Duranton, entitled “Speed.” What aspect of speed are you looking at and why is it important?

A:  Bakeries in the Soviet Union used to hand out bread for free to the first in line while those at the back wait for the next batch. This was wasteful. It meant time was spent waiting that could otherwise be used for something else, and it gave bread to people with the most time on their hands rather than to the hungriest or the hardest working. We allocate highway space in much the same way. The commuter who arrives on the road at 7:00am gets to travel, but the one who arrives at 7:30am needs to waits in a traffic jam until road capacity becomes available. Just as for the old Soviet bakery, this leads to a lot of time wasted in traffic jams and assigns scarce rush-hour capacity to people willing to wait in traffic, who might not be the people who value rush hour travel most highly.

In our research we are try to understand the determinants of  driving speed in order to estimate the value of time lost to waiting in traffic. Since road travel, one way or another, accounts for about 18% of gdp, the value of this waste is a big number. We also want to develop a basis for making guesses about what a good road pricing system would look like.

Q You claim there are sizable welfare gains to be had from more sensible transportation policies? What sorts of policies are we talking about? Taxes on driving?

A:  Our research suggests that the failure to price access to roads leads Americans to waste tens of billions of dollars worth of time each year sitting in traffic. Yet roads are congested only part of the time and even our biggest and busiest cities have unused road capacity off peak. If we impose tolls on congested roads at congested times, we give people an incentive to shift their travel to an uncongested time when we have surplus road capacity. This saves people from waiting in traffic and will likely increase the capacity of our road network.

QAre there areas where congestion pricing has worked? Could it be implemented on a wide scale in the United States?

A:  Stockholm, London, and Singapore, and a handful of U.S. roads and bridges have congestion pricing programs. In these places we see big increases in travel speed in response to pretty small charges for peak hour road use. With that said, the devil is in the details. So far, these programs are expensive to administer and it is easy to imagine ways that they could create problems. Rather than aiming for wide scale application to the United States we ought to encourage pilot programs in congested cities like New York, Miami, Seattle, Boston and Portland. As we gain experience administering congestion pricing programs we can apply them more widely.

Q In earlier research you find that widening and building more roads actually creates more traffic. What is “The Fundamental Law of Road Congestion” and what are its implications for transportation policy?

A:  In this project we examine the relationship between the stock of highways and arterial roads in large U.S. cities and the total amount of road travel in these cities. More precisely, it examines the relationship between a city’s total lane kilometers of highway and arterial road and total miles driven within the city in a year. We find that a one percent increase in road lane kilometers causes almost exactly a one percent increase in driving. We also find that changes to the stock of buses in a city’s public transit network do not affect driving.

This means that we should not expect either road or transit expansions to alleviate traffic congestion in the long run. The only policy that we know to be effective at reducing traffic congestion is congestion pricing.

QWhen might investments in public transportation or road building be worthwhile?

A:  Even though road and transit expansions probably won’t reduce congestion on our roads and highways, they will allow more people to move around. We want to evaluate transportation infrastructure on the basis of the value of these extra trips. If a new subway line allows an extra 50,000 people to work downtown, we need to decide if the extra economic activity downtown justifies the cost of the train. The same is true of road expansions. We don’t have good answers to this question yet. Generally, it looks like expansions of highway and subway capacity are so expensive that it is going to be difficult to pass this test, especially in the countryside where rural state senators like to send federal highway funding. On the other hand, making investments that squeeze more capacity out of existing roads and tracks in big cities is going to be easier to justify.

For more from Matthew Turner on transportation policy, read his article in the Fall 2010 edition of PERC Reports.


Urbanization for Population and the Planet

National Geographic recently launched its “Seven Billion Special Series“–a year-long series on global population. I hesitantly read the first article expecting more of the same old gloom and doom but “The City Solution”  offers a refreshing take on why economists and environmentalists can embrace cities.

With Earth’s population headed toward nine or ten billion, dense citites are looking more like a cure–the best hope for lifting people out of poverty without wrecking the planet, writes Robert Kunzig.

Harvard economist Edward Glaeser supports this point of view in his new book, Triumph of the City where he writes, “There’s no such thing as a poor urbanized country; there’s no such thing as a rich rural country.” Poor people flock to cities, according to Glaeser, because there is more money and cities produce more because “the absence of space between people” makes it cheaper to move goods, people, and ideas. Moreover, city dwellers tread lightly:

Their roads, sewers, and power lines are shorter. Their apartments take less energy to heat and cool…and they drive less.

The fear of urbanization has not been good for cities, countries, or for the planet. The author suggests that it is a mistake to see urbanization as evil rather than as an inevitable part of development. People (and planners) should no longer look at cities as tumors “but as concentrations of human energy…to be tapped.”


Considering the Costs of Climate Adaptation

Yesterday afternoon I attended a lecture by Michael Greenstone, the 3M Professor of Environmental Economics and former chief economist of the Council of Economic Advisers during the first year of the Obama Administration, addressing the question, “Will Adaptation Save Us from Climate Change?” This lecture was the keynote address at a PERC workshop on “Human Adaptation to Climate Change” I’ve been attending this week.

Greenstone set the stage by observing that there are three possible approaches to the threat of climate change: 1) mitigation — reducing emissions of greenhouse gases; 2) adaptation — responding to climate change by seeking to ameliorate its negative effects, and 3) geoengineering — attempting to modify the climate in some way to offset the effects of increased greenhouse gas concentrations. The first of these is unlikely to happen in the near term, as the United States and other nations have shown themselves to be quite resistant to adopting meaningful mitigation measures. The third, whether or not it is viable or desirable, is generally not considered an acceptable approach geo-politically. As a consequence, he suggested, in all likelihood we will have to engage in some degree of adaptation to climate change.

In Greenstone’s view, the question is not whether or not human civilization will survive. It almost certainly will. Nonetheless, climate change could have substantial negative conseuqences. Rather, the relevant questions are how adaptation will occur over various time frames, the cost of such adaptation, and how effective adaptive responses will be. There is some research that has investigated the costs and potential of near-term response to some degree of climate change, but not nearly enough on longer term responses to climate change and its consequent environmental effects. Insights can be drawn, however, from other research that documents individual responses to changes in environmental conditions. For example, Greenstone co-authored a paper showing that some individuals respond to local air pollution levels by, among other things, purchasing medications that relieve some of the respiratory effects of higher pollution levels. Such adaptation may reduce the negative effects of pollution, but it still comes at a cost.

Adaptation takes many forms. Some adaptation to climate change would involve changes in infrastructure and the like, but much adaptation is likely to occur at the individual level. To take a simple example Greenstone used in his talk (based on this paper): on hotter days, people use more air conditioning. This matters because high temperatures tend to correlate with increased mortality. Therefore, were it not for air conditioning (and other means of adaptation), an increase in temperature would cause a greater increase in mortality. With air conditioning, the mortality increase is less, though energy use is greater.  This illustrates how individuals can alter their behavior to compensate for some of the consequences of higher temperatures, albeit at some cost.

In poorer, less-developed nations, such as India, on the other hand, the results are somewhat different. As Greenstone explained, compared to the United States, India has less adaptive capacity, so the mortality effects of warming would be greater – far greater. There is a lot of adaptive capacity in wealthy, industrialized nations, but not so much in poorer, less-developed nations. Moreover, the United States’ adaptive capacity has improved dramatically over the course of the past century. That is, the relationship between high temperatures and increased mortality in the United States has weakened over time as the nation has become wealthier and more technologically advanced, making it easier for individuals to adapt to temperature changes.

One possible response to Greenstone’s analysis is that if wealthier nations can adapt to climatic changes more readily than poorer nations, as much attention should be paid to making poorer nations wealthier – and improving their adaptive capacity – as to figuring out how to reduce global greenhouse gas emissions so as to mitigate the threat of climate change. From an economic standpoint, the costs of mitigation could be compared to the costs of adaptation, and if the costs of mitigation are greater, this would provide an economic justification for focusing on adaptation instead of mitigation – and some would certainly endorse this view. Indeed, many in developing nations embrace this view. In any event, even if mitigation policies are eventually adopted, there will need to be some degree of adaptation, some of which will be undertaken at the individual level.

Originally posted at the Volokh Conspiracy.


The Fundamental Law of Road Congestion

Photo: Minesweeper on en.wikipedia

Matthew Turner, a visiting 2011 PERC Julian Simon Fellow, was interviewed on All Things Considered this weekend about road congestion:

For decades, urban areas across the country have been adding lanes and building roads to fight congestion, but a recent study by University of Toronto researchers finds that widening and building more roads actually creates more traffic.

“What we found was that in cities where there was more roads, there was more driving,” economist Matthew Turner, a co-author of the study, tells weekends on All Things Considered host Guy Raz. “In particular, if you had 1 percent more roads, you had 1 percent more driving in those cities.”

Turner’s study also looked at public transportation, and the results were similar: More buses and trains create more riders, but generally don’t make a dent in traffic problems.

“As you increased a city’s stock of light rail or bus cars, there’s no impact on the amount of driving,” Turner says.

The one-to-one relationship between roads and vehicle miles driven is what Turner and his co-author Gilles Duranton refer to as “the fundamental law of road congestion” [PDF]. And since increases in road capacity and expansions to public transit do not reduce miles drive, the authors claim congestion pricing is the only effective tool to curb traffic problems.

This is certainly not what Los Angeles residents wanted to hear as they prepare for this weekend’s “Carmageddon” — a $1 billion widening project that will close Interstate 405 for more than 50 hours and is expected to create traffic jams more than 30 miles long.


A Break with the Past

by Jane S. Shaw

The Boston Globe
reports that New Urbanism is being challenged by “landscape urbanism,” an approach to planning that is comfortable with people living in “spacious suburbs.”  The conflict pits Andres Duany,  designer of  nostalgic “cityscapes”–towns with a “compact grid of narrow, tree-lined streets laid out around a walkable downtown with stores and civic spaces,” according to the Globe–against Charles Waldheim, upstart landscape architect now at the Harvard Graduate School of Design.

This is a great development, in my view, because it could usher in an era of common sense in urban (and suburban) planning.  We may, at last, get away from the nostalgic effort to recreate cities of the past, exemplified by Duany’s vision (often incorrectly touted as the legacy of Jane Jacobs’ vision). In fact, the Globe writer, Leon Neyfakh, says that one of the major themes of the new landscape urbanists is that:

American cities in the 21st century are not like American cities from the 19th century, and should not be expected to function the same way.

A valuable insight!


And Environmental Justice for All

by Shawn Regan

The Washington Post reports this week that the EPA is ramping up its efforts to address environmental justice—a concern that director Lisa Jackson calls “the biggest chunk of unfinished business when you think of the environmental landscape.”

As the WaPo writes, the EPA has “forced emitters, including container-glass plants, cement plants and oil refineries, to install pollution controls in poor areas struggling with bad air quality.”

But will such measures achieve their ends of improving environmental quality in poor communities? Likely not, as H. Spencer Banzhaf explained in PERC Reports:

If pollution lowers land prices, and if poorer households systematically locate in lower-priced communities, any policy designed to break the correlation by targeting firms’ behavior eventually will be reversed by households’ behavior. As long as pollution crops up somewhere, the cycle is likely to repeat itself: land values will fall, the rich will move out, and the poor will move in.

Not only will such efforts be ineffective, they may even cause harm to the very residents they purport to benefit:

Moreover, cleaning up pollution in disadvantaged communities may actually harm incumbent residents. The cleanup is likely to trigger gentrification and increase housing costs. These increased housing costs may more than offset the benefit of a cleaner environment. Of course, for those who own their homes, this appreciation represents an appreciation in their housing assets. But most poor households are renters. For them, gentrification represents an increase in rents, which benefits only absentee landlords.

Instead, Banzhaf says defining property rights and lowering transactions costs will result in “markets for pollution” emerging. If a community has the right to be free from pollution, polluters must compensate residents to locate in their community.

This market process, borne out of the important work of Ronald Coase, is already happening with many solid waste landfills, and should be the focus of efforts to promote environmental justice. For more on this topic from H. Spencer Banzhaf, see PERC’s Policy Series “Environmental Justice: Opportunities Through Markets.”


Why Is Parking Free?

by Wally Thurman

Tyler Cowen has recently promoted the idea that parking in America is costly and inappropriately provided mostly for free.  Summarizing a recent book by Donald Shoup, The High Cost of Free Parking, he argues that at zero price, Americans park their cars a lot and generate congestion and impose costs on others.  Among the problems he cites: local zoning boards require stores to build a minimum number of parking spaces–more than they would choose absent coercion. Cowen argues that it would improve resource allocation if such requirements were eliminated, the end result being fewer parking spaces and, presumably, stores charging for their use.

Cowen’s observations are intriguing–they suggest that free market proponents should urge planning boards to free big-box retailers from the yoke of parking requirements.  Let the market speak and it will say that parking–unlike information on the internet–does not want to be free.

While still digesting Cowen’s observations, I awoke today to a letter to the editor in my hometown Raleigh News & Observer, written by environmental resource conservation professor George Hess of North Carolina State University.  In his off hours, Hess serves on the Land Use Review Board of Knightdale North Carolina.  He writes that his board does, indeed, stipulate minimum numbers of parking spaces that a retail development should have.  (It also stipulates maximums.)  But, he observes, developers never propose to build parking lots of just the minimum size and often seek to build more parking spaces than the board’s maximum.  At least in the case of Knightdale (near Lizard Lick, by the way), the government restriction that Cowen worries about is never binding.

If Hess’s experience is the norm–and I don’t know that it is or isn’t–then I see no market-based opposition to free parking.  It may be unsound to have a retail society based on free parking.  But it is unlikely due to government regulation.

Suppose that Hess’s experience generalizes: that free parking at retail stores is not the result of government regulation.  We’re left with the question of why stores provide free parking when they do (they don’t in Manhattan.)  I see two possible answers. [Read more…]


Environmental Justice or Gentrification?

by Shawn Regan

This week, EPA director Lisa Jackson announced new plans for her agency to incorporate environmental justice into its decision making processes. Outlined in a guidance document released this week, the EPA will begin considering the disproportionate impact pollution has on low-income and minority communities when drafting new rules.

Several factors have led to a federal fight against environmental injustices.  First, a 1983 government study found that hazardous waste landfills in the Southeast were almost entirely located in low-income, minority communities. In 1994, President Clinton signed an executive order promoting nondiscrimination in environmental policies. The EPA’s latest announcement is an extension of this broader effort at improving environmental inequalities.

But as H. Spencer Banzhaf writes in a recent PERC Policy Series, this type of well-intentioned effort may be misguided. Banzhaf’s analysis suggests that the result of this top-down attempt to improve environmental quality in lower-income neighborhoods amounts to “environmental gentrification” and can harm the very people it seeks to help:

Residents who moved into dirtier communities tend to place a higher priority on low-cost housing than on the environment. Cleaning up the environment may increase those costs by more than their willingness to pay, as wealthier households bid up property values. As poor residents are more likely to rent their housing, they stand to lose from these increased housing costs.

The net effect can be perverse. Clean-up efforts can supplant lower-income residents with wealthier ones who have a higher willingness to pay for environmental amenities.

Other households that had been avoiding the pollution may move back in, driving up housing prices…The original residents have to move out or pay the new premiums. Although they enjoy the environmental improvement, the higher rental payments more than offset that gain, making them worse off. The biggest gainers are the absentee landlords and some of the new gentrifying residents.

Even the National Environmental Justice Advisory Council recognizes this phenomenon, writing in a report that “environmental cleanup of these formerly industrialized, now residential, communities can be a powerfully displacing force.”

Banzhaf’s solution? Reduce transactions costs between communities and polluters. If transactions costs are low enough and property rights are defined, “markets in pollution” will emerge.

Specifying the right to pollute—or to be free from pollution—allows pollution to be traded. [Ronald] Coase suggested, for example, that negotiations could arise over factory smoke. If factories have a right to pollute, local residents may pay them to not pollute. If local residents have a right to be free from pollution, factories might compensate them to accept some pollution.

There is evidence that this market-based process is functioning. About half of all solid-waste landfills in the U.S. provide compensation to nearby communities, giving out an average of $1.5 million in 1996 and as much as $20 million in one instance.

If the current EPA scheme reduces transactions costs for lower-income communities, it will help facilitate Coase-like solutions that compensate nearby landowners. But if it simply attempts to eliminate environment injustices, Banzhaf’s research indicates it will likely have perverse results.

Click here to read H. Spencer Banzhaf’s PERC Policy Series “Environmental Justice: Opportunities Through Markets.”

Shawn Regan is a public affairs fellow at PERC.