June 6, 2012 Brian Kelsey

Does Traffic Hurt The Economy?

Cue the mobility paparazzi and sustainability pundits. This one should get people going today.

The WSJ highlighted a new study investigating the relationship between productivity, as measured by GDP per capita (a flawed statistic but we’ll get to that in a minute), and traffic congestion. The study was conducted by Eric Dumbaugh at Florida Atlantic University and is linked here: Rethinking the Economics of Traffic Congestion. The WSJ headline: Areas With More Traffic Are More Productive.

First, as the authors point out, this in no way suggests that traffic causes productivity. The point is simply that economic activity tends to be higher in dense, urban areas, and dense, urban areas tend to have more traffic. This is a statement of correlation, not causation. So, while it is interesting that the math works out the way it does–Dumbaugh found that a 10% increase in traffic delay per person was associated with a 3.4% increase in GDP per capita–there is not much new here compared to what we already knew from Jane Jacobs, Edward Glaeser, Richard Florida, and others.

But the more interesting point, to me at least, is something the authors left out of the discussion: What is the opportunity cost of traffic delay? In other words, if people in these dense, urban areas didn’t have to spend as much time in traffic and could use that time gained to generate even more economic activity, how would that affect the regional economy? For urban planners and policymakers, that sort of information would be extremely useful for prioritizing investments in improved mobility and figuring out how to pay for them. Some of the HUD Sustainable Communities grant-funded initiatives, such as the Sustainable Places Project in the Austin region and NC Tomorrow, are working on decision-making tools that will help answer these questions.

Next, a few words about GDP per capita. As my students would attest, this is something we covered, ad nauseam, in my class this semester. GDP per capita is an inherently flawed approach for measuring economic development, especially in the realm of sustainability. International organizations, such as the World Bank or the OECD, rely on it because it’s one of the only fairly consistent things you can measure across countries at various stages of development. But it goes lacking in many ways. For example, rising GDP per capita could mean increasing profits with no gains in wages and incomes, or stagnant GDP and declining population. Without more information, it’s hard to know what’s really going on, and whether the economy is “better,” however you want to define that. It’s somewhat of a least-common-denominator approach.

Moreover, I think GDP per capita, notwithstanding its limitations, is more accurately described as a measure for standard of living, not productivity. I would have used GDP per worker to measure productivity, but I doubt it would have changed the results of the study in any meaningful way.

Finally, a point about traffic and economic development. A common refrain, especially in campaigns for more spending on highways, is that traffic is a deterrent to economic development. When companies are surveyed for their opinions about urban areas like Austin, traffic is invariably at or near the top of the list of negative factors. Perception does indeed matter in economic development, and undoubtedly we would all like to spend less time in traffic. But until somebody can show me conclusive proof that traffic was the deciding factor in scaring away an employer, given Austin’s many other location advantages, I’ll continue to believe that it’s a red herring. And the same goes for people who argue that economic competitiveness depends on availability of passenger rail.

The relationship between mobility and the economy is an evolving field of study. Competing for talent that can drive wealth creation in a community should be the bottom line for economic developers today. While evidence is starting to point to changing preferences among younger workers, we’re a long way from figuring this out.

Comments (2)

  1. Dan Begert

    Congestion is an indicator of economic productivity and as you point out, though an annoyance, it is not one that will seriously deter future development. That does not mean that it is not a problem, however. Light rail as a solution to address it is difficult to justify from a cost/benefit point of view, and new road construction and lane widening are short-term solutions that actually induce demand for road use and only temporarily relieve traffic conditions. As such, there really is no easy way to “solve” a congestion problem.

    On cue, as a sustainability guy, my solution would be to advocate planning for alternative modes of transportation, including bike lanes and trails, while also instituting some system of peak hour congestion pricing. Dedicating lanes for a rapid bus transit system would also be a good fix, because an investment in even the most clean, new, and efficiently run bus system would be significantly cheaper than rail, while retaining the flexibility to alter routes as necessary. These solutions would also help attract those young workers that Richard Florida and others are always talking about.

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