Road Building Results

by Elaine Schwartz    •    May 29, 2011    •    238 Views

If extra road mileage is built, would you predict more or less traffic?

The WSJ tells us that more roads led to additional driving from local residents, commercial traffic and people moving to the area. Public transportation did not influence driving decisions. Roads did. 10% more road mileage meant 10% more driving.

The Economic Lesson

Here is where economics enters the picture. This is all about cost. If we want people to do less of something, their cost needs to increase. With roads, the problem was traffic congestion. The solution, more roads, did not work because it did not increase cost. It made driving more attractive. As a result, the authors of this study conclude that the answer is congestion pricing. 

Similarly, looking at auto emissions and housing, again, cost makes the difference. For emissions, higher gas prices would reduce emissions. For housing, lower prices will increase sales. And yet, hasn’t public policy been the opposite?

An Economic Question: For auto emissions, assume your goal is diminished gasoline usage. For housing, your goal is more home purchases. Describe what will happen to demand and supply if cost is used to achieve the desired objective.

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