Sunday, May 29, 2011

Transportation planning with hands tied

Gilles Duranton and Matthew Turner have "The Fundamental Law of Road Congestion: Evidence from U.S. Cities" coming out in the American Economic ReviewHere is the pdf.  They investigate whether new highway or new transit investments relieve traffic congestion and find that the answer to both questions is "no".  And "Surprisingly, our data also suggest that a new lane kilometer of roadway diverts little traffic from other roads."  Their empirical work is interesting because it has to address the problem of simulteneity between road capacity and the demand for road use.

The findings corroborate Anthony Downs' "Fundamental Law of Highway Congestion" which is just one more way of saying that the absence of pricing messes things up.  Not only is congestion the default rationing device, but the build-option has limited usefulness if the price-option is discarded.  It' a little bit like having one hand tied behind your back. These thoughts are well understood and it is very good to have them corroborated via serious analysis.