Rethinking the Economics of Traffic Congestion

Traffic is not an economic problem. It’s an indicator of a healthy urban economy. 

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With a few notable exceptions, transportation planning practice in the United States is focused on managing or eliminating traffic congestion. Regardless of whether planners are advocating for highway infrastructure to improve level-of-service, or transit projects intended to “get cars off the road,” the underlying assumption is that congestion relief is an unmitigated good.

Such arguments are often based on the idea that traffic congestion and vehicle delay are bad for the economy. According to the Texas Transportation Institute, vehicle delay costs Americans $115 billion in wasted fuel and time each year. The common interpretation of such statistics is that our cities and regions would be so much more economically productive if only we could eliminate the congestion that occurs on urban streets.

But this begs the question: is traffic congestion really a drag on the economy? Economies are measured not in terms of vehicle delay or the amount of travel that people do, but in terms of the dollar value of the goods and services that they produce. If it is true that congestion is detrimental to a region’s economy, then one would expect that people living in areas with low levels of traffic congestion would be more economically productive, on a per capita basis, than those in areas with high levels of congestion.

This is a testable assertion. With the help of my research assistant Wenhao Li, I sought to determine whether vehicle delay had a negative effect on urban economies. I combined TTI’s data on traffic delay per capita with estimates of regional GDP per capita, acquired from the U.S. Bureau of Economic Analysis. I used 2010 data for both variables, converted them to their natural logs, and modeled them using regression analysis.

And what did I find? As per capita delay went up, so did GDP per capita. Every 10 percent increase in traffic delay per person was associated with a 3.4 percent increase in per capita GDP. For those interested in statistics, the relationship was significant at the 0.000 level, and the model had an R2 of 0.375. In layman’s terms, this was statistically-meaningful relationship.

Such a finding seems counterintuitive on its surface. How could being stuck in traffic lead people to be more productive? The relationship is almost certainly not causal. Instead, regional GDP and traffic congestion are tied to a common moderating variable - the presence of a vibrant, economically-productive city. And as city economies grow, so too does the demand for travel. People travel for work and meetings, for shopping and recreation. They produce and demand goods and services, which further increases travel demand. And when the streets become congested and driving inconvenient, people move to more accessible areas, rebuild at higher densities, travel shorter distances, and shift travel modes.

Stated another way, people adapt to congested environments. Because cities provide greater access to job opportunities than do rural areas, as well as wages that are more than 30 percent higher than their non-metropolitan counterparts they have a powerful economic incentive to do so.

Fortunately for our cities and their economies, urban environments are precisely what is sought by the millennial generation. 88 percent of millennials report that they would prefer to live in urban environments, and they are already driving less and riding transit more than their Gen X and boomer counterparts. Indeed, many millennials view driving as a vice, with 55 percent indicating that they have made a deliberate effort to reduce the amount of driving that they do. They are also leading a surge in cycling in cities like Seattle, Minneapolis, Denver, and Washington, D.C., all of which have seen their share of bike commuting double over the last decade. These trends are of great concern to the auto industry.
 

While behavioral adaptations and changes in consumer preferences have already begun to address the issue of personal transportation in congested environments, a second issue remains unanswered: how do congested areas deal with freight and goods movement? A common argument is that if a region’s roadways are congested, goods will be unable to get to market and its economy will falter. Yet even the most casual glance at our most congested regions - New York, Los Angeles, and San Francisco to name three - quickly dispels this idea. These are not places where consumer choices are limited, nor are they areas with stagnant economies. Quite the contrary. They are precisely the areas where one finds not only the most vibrant economies, but also the greatest variety of goods and services.

How is this possible? It is important to recognize that major manufacturing and freight activities rarely occur in congested city centers, where land values are too high to make these activities economically viable. Likewise, long-haul truck drivers, who are paid on a per-mile travelled basis, have a powerful economic incentive to avoid traveling through urban areas during congested time periods, which reduces the number of miles per hour they can travel, and thus the number of dollars per hour they receive for their time. Urban economies naturally encourage these activities to move away from congested areas and time periods.

It is nevertheless true that goods movement is growing in the United States, making it a transportation issue that cannot be dismissed lightly. Should a region discover that it needs additional capacity for freight traffic, plenty of capacity can be found by converting a “free” highway lane into a truck-only toll lane, which not only allocates highway capacity for goods movement, but which also generates the revenues needed to pay for the highway’s maintenance. Given that highway infrastructure in the United States is aging and in growing need of repair, and that the ongoing decline of federal gas tax revenues has made it difficult for many state and local governments to fund basic highway maintenance, such solutions are likely to look increasingly attractive in the future.

Within cities themselves, the relevant issue is neither manufacturing nor long-haul transport, but the movement of goods destined for local markets. This is currently addressed through a variety of strategies, including the scheduling of deliveries to off-peak periods and the use of bicycle couriers in highly-congested areas. It has also led to the development of more technologically-sophisticated solutions, such as the use of GPS-based fleet management systems that permit dynamic trip scheduling and routing, allowing drivers to bypass localized pockets of traffic congestion. This is a growth industry that is projected to generate more than $9 billion in annual revenues by 2015. As Jane Jacobs has observed, city economies generate the resources needed to solve city problems.

None of this is to suggest that there is no benefit in having our transportation system operate efficiently. But automobile congestion, vehicle delay, and their proxy, level-of-service, are not measures of system efficiency. Nor are they measures of economic vitality. They are nothing more or less than measures of how convenient it is to drive an automobile.

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About the Author

  • Eric Dumbaugh is an associate professor and interim director at the School of Urban and Regional Planning at Florida Atlantic University.