Supply and demand and regional airfares

Back in June, Stuff published a report on regional airfares, focusing on the way that prices are affected by major events such as concerts and sports competitions. Now, I’m no airline economist, but I’ve got a general interest in transport pricing so I figured that it would be worth taking a look at the topic.

The point of the article seems to be that airplane tickets are higher during periods of high demand. That doesn’t seem too weird, but this guy in Nelson is absolutely ropeable at the thought:

Nelson man Steffan Eden is furious about Air NZ’s fares from Nelson to Auckland and return for the weekend of March  5 and 6 when Madonna will give her first New Zealand concert at the Vector Arena.

Fares that the previous weekend cost $79 are twice that at $159 on the weekend of the concert, an $89 fare rises to $169; and a $129 fare becomes $209…

“Look at the fares the weekends before and after the concert, they’re normal fares. Then on the concert weekend they’re virtually double.  It’s quite blatant.”

Eden said the same thing happened when he wanted to go to the Cricket World Cup match between New Zealand and England on February 20.  “I wanted to take my kids but didn’t in the end because of the cost,” he said.

The man quoted in the article seems to argue that these jumps up in fares are due to uncompetitive or discriminatory practices by Air NZ. By contrast, the airline says that the price increases are just due to cheaper tickets selling out faster:

An Air New Zealand statement said it has been experiencing high demand for flights into and out of Nelson that weekend due to both the New Zealand Masters Hockey Tournament which is being held in Nelson from February 28 to March 5 and the Madonna concert in Auckland.

“As you will appreciate, where there are major events on flights tend to sell out well in advance, with the cheaper fares selling out the fastest, so booking as early as possible is recommended.”

Now, as an economist I’m always wary of the potential for companies with few immediate competitors to exercise market power over their customers. But in this particular case, I don’t think that’s happening. What we are seeing is the normal, and in fact beneficial, working of supply and demand.

Let’s start with the supply side. Air NZ doesn’t have an infinite budget for airplanes and staff. It faces constraints. If it wanted to run more services between Nelson and Auckland on particular weekends of high demand, it would have to either:

  • Pull airplanes off other regional routes, which would potentially satisfy Nelson’s demand but would in turn lead to similar stories about how unfair Air NZ was being to Napier or Timaru or what-have-you, or
  • Buy extra airplanes and hire extra staff that would sit idle most of the time and fly only during a few periods of exceptionally high demand. This is superficially appealing, but it would mean an across-the-board increase in fares to pay for a bunch of empty planes.
mojave desert boneyard1

This isn’t really related, but it’s an interesting picture (Source)

So that’s the supply side. What about demand?

Air NZ has observed, correctly, that demand for flights is not constant over time. Simply put, more people want to fly at some time periods than during others. Airlines can respond to this in a few different ways. The first would be to keep prices constant, regardless of demand. This would turn air travel into a first-come-first served game, which is great if you always buy tickets months in advance but terrible if you have to take a last-minute trip for work or a medical emergency.

The second approach, which Air NZ may be using, is to charge higher prices during periods of higher demand. This may seem less fair, but it’s actually better for (almost) everyone. It means that airlines aren’t constantly booking out flights well in advance or misallocating resources in a futile attempt to give everyone a cheap flight. Travellers also benefit – they get a choice between paying more to travel at their preferred time or finding a cheaper fare at an off-peak time.

I fly for work on a semi-regular basis so I’ve noticed some of the patterns over time. Between 4-6pm, departure gates fill up with suit-wearing men and women headed home from their meetings in time for dinner. Not surprisingly, prices are highest at this time. Later on, prices drop, planes get a bit emptier, and the suits get replaced with casual clothes. By the end of the night, most of the people who want to get home have gotten there, and for a price that they’re willing to pay.

Occasionally, this means that somebody decides not to go to a Madonna concert. But that’s not a flaw with supply and demand – that’s how it’s supposed to work! If the man quoted in the Stuff article didn’t go, it’s only because someone who valued being there more bought the ticket instead.

Finally, I have to ask: Why are people outraged when the principles of supply and demand are applied to airfares? Perhaps it’s because we routinely ignore those principles everywhere else in our transport system.

As numerous economists have observed, we manage our roads like a Soviet supermarket. The price to use roads is set at a single, low value – i.e. NZ’s comparatively low petrol taxes – and thus people queue up for ages to drive on them every morning and evening. The same thing happens with parking, where we have regulated to make it abundant and free and ended up in a situation where people can never get enough parking.

In economic terms, there is no difference between this:

SH16 traffic

And this:

latvian-bread-line

They are both situations in which scarce resources, including people’s time, are misallocated due to poorly-functioning price signals. So rather than asking “why don’t we price air travel as inefficiently as roads?”, we should ask “why don’t we price roads as efficiently as we price airfares?”

A failure to price roads efficiently badly distorts our supply decisions. We are forever pouring more asphalt and concrete that accommodates a few more slowly-moving cars at peak times and sits idle much of the rest of the time. By contrast, congestion pricing would allow us to avoid many of these expenditures by giving people an incentive to travel differently.

What do you think about airfares – and transport pricing in general?

The economics of fare policies, part 1

A few months back, Auckland Transport put out its new fare policy for consultation. The draft policy, which they call Simplified Fares, has two main elements:

  • Standardised fare zones that ensure that journeys within or between zones cost the same regardless of whether you’re travelling by bus or rail [ferries are excluded]
  • No transfer penalties between services, which is a key element in enabling a frequent connective network.

Those are indeed simple principles, but developing and implementing a fare policy is seldom simple. So the whole thing got me thinking: Why do public transport fares work the way they do? And could we do things differently?

As I’m curious, I figured that I should take a quick look at the economics of fare policies. Part one of the series looks at the biggest-picture question: Why do we subsidise public transport?

First, some background. In most developed-world cities, public transport systems are subsidised by taxpayers. Users pay some of the operating costs – ranging from as low as 10% to as high as 80% – but seldom all. In New Zealand, the national farebox recovery policy requires all regional transport agencies to cover 50% of their public transport costs from fares. However, data from the Ministry of Transport suggests that some agencies are closer than others to this target:

MoT farebox recovery rates 2013-14

Is 50% the right number for all regions? I don’t know – and the answer depends in part on what other goals we’re trying to accomplish with public transport pricing. But it’s clear that some level of subsidy must be provided in order for the entire transport system to work efficiently.

To see why, we need to take a look at what economists call “second-best pricing”. According to Wikipedia, it can be desirable to impose a subsidy to “offset” for an uncorrected market failure elsewhere:

In an economy with some uncorrectable market failure in one sector, actions to correct market failures in another related sector with the intent of increasing economic efficiency may actually decrease overall economic efficiency. In theory, at least, it may be better to let two market imperfections cancel each other out rather than making an effort to fix either one.

In transport, we have a situation where people have multiple options for getting around. They can drive, take the bus (or train), cycle, etc. In this situation, a price change in one market – say, a fare increase for public transport – can encourage people to switch to another mode instead of paying more.

As I argued in a recent post on congestion pricing, road space is usually not priced “efficiently”. All road users pay fuel taxes or road user charges based on the total number of kilometres driven or litres of petrol used. But they don’t pay more to drive on busy roads, where they impose delays on other drivers. As this diagram from a 2012 UK study on the external costs of driving shows, the last 10-20% of car trips impose significant costs on society.

marginal-cost-transport

Public transport can play a useful role in smoothing off the big spike at the right hand side of that chart, by providing a more space-efficient option for travelling on popular, congested routes. Another way of saying that is that in the absence of congestion pricing (and in the presence of other subsidies for driving, such as minimum parking requirements), higher public transport fares can result in a perverse outcome – additional congestion and delays for existing road drivers. This is shown in the following diagram:

PT fares and congestion diagram

Effectively, a failure to price roads efficiently means that we have to provide subsidies for public transport to prevent car commutes from being even more painful than they currently are. Public transport subsidies are, in that sense, subsidies for drivers. By making your neighbor’s bus fare cheaper, they in turn make your drive to work a bit easier.

Finally, it’s worth considering how we got into this situation. 80 or 100 years ago, public transport systems tended to cover their operating costs with fares. For example, Auckland’s tram system was profitable, if in need of maintenance and refurbishment, up until its removal in the mid-1950s. (Mees ref?) This changed, in large part, due to the introduction of subsidised motorways.

This article by Joseph Stomberg at Vox describes how the US interstate highway system was developed in the 1950s as an explicitly subsidised – i.e. not tolled – transport mode:

The first step was changing how roads were funded. In the 1930s, there were already privately owned toll roads in the East, and some public toll highways, like the Pennsylvania Turnpike, were under construction. But auto groups recognized that funding public roads through taxes on gasoline would allow highways to expand much more quickly.

They also decided to call these roads “free roads,” a term that was later replaced by “freeways.” Norton argues that this naming shift was essential in persuading the federal government — and the public — to shift away from tolls. “It started with calling the roads drivers pay for ‘toll roads,’ and calling the ones that taxpayers pay for ‘free roads,'” he says. “Of course, there’s no such thing as a free road.”

In other words, the “original sin” of transport subsidies was the construction of non-tolled highways paid for out of general tax revenues. This choice led in turn to a situation in which we must adopt “second best pricing” in public transport, and offer an offsetting subsidy. I’m not necessarily opposed to this… but it does mean that I am skeptical to complaints that buses and trains are subsidised.

What do you think we should do about public transport pricing?

If congestion is so bad, we should price it

Last Thursday, the Government shut the door on the idea of road pricing for Auckland, saying that it would prefer to undertake “a year-long negotiation with the council on an agreed 30-year programme focusing on reducing congestion, and boosting public transport where that reduces congestion.”

The following day, the road/infrastructure lobby undertook a bit of a media blitz pushing for more construction. As part of that, we got sent this press release from the Auckland Chamber of Commerce:

Media Release

12 June 2015

Auckland – defined by congestion

The Auckland Chamber of Commerce strongly supports the initiative of Government to seek a negotiation with Auckland Council on an agreed 30-year programme focusing on reducing congestion, and boosting public transport where that reduces congestion.

Michael Barnett, head of the Auckland Chamber was responding to news reports that Transport Minister Simon Bridges and Finance Minister Bill English have sent Auckland Mayor Len Brown a letter proposing a negotiation and ruling out allowing Auckland to bring in motorway charges to help fund transport projects.

“The Auckland business community overwhelmingly agrees that immediate action to address the City’s transport congestion is required,” said Mr Barnett.

In short, congestion is bad. Really bad. It’s a crisis deserving immediate action… in the form of a year-long talk-fest between local and central government.

Of course, it’s difficult to find reliable empirical evidence that Auckland’s congestion levels really are that bad. Average commute times are a cruisy 25 minutes – well below many other cities. NZTA research has found that the actual cost of congestion is neither (a) largely a monetary cost for businesses or (b) anywhere as large as people claim. While people like to claim that congestion costs “billions” annually, a more realistic figure is $250 million. The one source that does claim that Auckland has world-beating congestion, the TomTom index, has serious methodological flaws.

Nevertheless. Even though its empirical basis is shaky, the Auckland Chamber of Commerce’s recommendations for projects are not crazy. In fact, they seem to be on Auckland Transport investment radar already:

A good outcome from Government and Auckland Council working together would be a package of fast-tracked projects aimed at:

  • Improving public transport services’ reliability and frequency
  • Getting as much use as possible out of the transportation system we have
  • Removing parking from major arterial routes to create more usable road space.
  • More high occupancy lanes to encourage a reduction of sole occupancy cars.
  • Strengthened integrated traffic management covering arterials and motorways.
  • Expanding park and ride facilities at main trunk rail and busway stations.

But even if the ideas are sensible, “fast-tracking” them will be expensive. We simply can’t build everything at once. Even if Government was willing to give Auckland Council more tools to raise revenue – which is unlikely given its refusal to consider road tolls – capacity constraints in the civil engineering business would make it hard to do much more.

To its credit, the Chamber seems to recognise this and agree that we need to prioritise use of our scarce resources:

“Good leadership is about partnership,” said Mr Barnett. “It is about understanding that we have limited resources, so we must learn to prioritise correctly,” he concluded.

Which leads me to my point. If congestion is such a big problem, why don’t we use congestion pricing to make sure that we’re prioritising use of our road network efficiently?

I find it very strange that business groups aren’t more enthusiastic about this idea. If congestion is really as bad as they say it is, why aren’t they loudly advocating a policy solution that would actually address it? (Road-building doesn’t work.) Surely freight companies and construction firms would benefit from the resulting reductions in traffic, even if they had to pay a bit for them.

In my experience, congestion pricing is one of those ideas that virtually all economists agree on. It’s like free trade in that regard – there might be some disagreement about the fine details, but most agree that it’s a good idea. But it hasn’t gotten as much attention in other quarters.

So here, for example, is William Vickrey, who won the Nobel Memorial Prize in Economics for his pioneering work on the topic:

Known among economists as “the father of congestion pricing,” Professor Vickrey sees time-of-day pricing as a classic application of market forces to balance supply and demand. Those who are able can shift their schedules to cheaper hours, reducing congestion, air pollution and energy use — and increasing use of roads or other utilities. “You’re not reducing traffic flow, you’re increasing it, because traffic is spread more evenly over time,” he has said. “Even some proponents of congestion pricing don’t understand that.”

He has admitted that his ideas have sometimes not been well received by those who set public policy because, “People see it as a tax increase, which I think is a gut reaction. When motorists’ time is considered, it’s really a savings.”

And here’s urban economist Edward Glaeser commenting that more megaprojects aren’t the best fix for transport issues:

Infrastructure investment only makes sense when there is a clear problem that needs solving and when benefits exceed costs. U.S. transportation does have problems — traffic delays in airports and on city streets, decaying older structures, excessive dependence on imported oil — but none of these challenges requires the heroics of a 21st century Erie Canal. Instead, they need smart, incremental changes that will demonstrate more wisdom than brute strength…

IMPLEMENT CONGESTION PRICING: We should expect drivers to pay for more than just the physical costs of their travel. We should also expect them to pay for the congestion that they impose on other road users. If you have a scarce commodity, whether groceries or roads, and you insist on charging prices below market rates, the result will be long lines and stock outs, like those that bedeviled the Soviet Union decades ago. Yet U.S. roads are still running a Soviet-style transport policy, where we charge too little for valuable city streets. Traffic congestion is the urban equivalent of a stock out.

And here’s economist Matthew Turner, who co-authored one of the most comprehensive studies of “induced traffic”, which I discussed here:

So what can be done about all this? How could we actually reduce traffic congestion? Turner explained that the way we use roads right now is a bit like the Soviet Union’s method of distributing bread. Under the communist government, goods were given equally to all, with a central authority setting the price for each commodity. Because that price was often far less than what people were willing to pay for that good, comrades would rush to purchase it, forming lines around the block.

The U.S. government is also in the business of providing people with a good they really want: roads. And just like the old Soviets, Uncle Sam is giving this commodity away for next to nothing. Is the solution then to privatize all roads? Not unless you’re living in some libertarian fantasyland. What Turner and Duranton (and many others who’d like to see more rational transportation policy) actually advocate is known as congestion pricing.

And here’s the OECD in its latest country report on New Zealand:

A just-released OECD economic survey blames years of under-investment in infrastructure for the city’s roading problems. It calls for a mix of tolls and congestion charges to alleviate peak-hour traffic pressure and help fund new roads and more public transport.

“Placing a cost on travel during peak periods could incentivise drivers to travel at different times (off-peak), if they are not required to be on the roads, or could encourage more carpooling and use of public transportation,” the report says.

In short, if you’re worried about congestion, you need to take congestion pricing seriously. There are undoubtedly reasons why we may not want to implement congestion pricing, ranging from technical feasibility to equity concerns. But in my view it’s ridiculous for business groups and politicians to get all up in arms about the issue – and promptly rule out one of the few realistic solutions.

What do you think about congestion pricing?

We need to stop lying to ourselves about congestion

Without getting back on the topic of pohutukawas or St Luke’s Road again, I did notice something funny in the statement that Greg Edmonds, Auckland Transport’s Chief Operating Officer, made in Metro Magazine in response to the issue:

The founding premise of the Auckland super city was that the city’s congestion was costing $1 billion a year in lost productivity and this had to change.

[…]

Auckland Transport (AT) was created to solve the congestion problem…

Some people might think that this is a slightly too narrow view of Auckland Transport’s mandate. Whatever. Fair enough.

However, there is actually a much more serious problem with Mr Edmonds’ comments. Simply put: the notion that we can “solve the congestion problem” is not at all realistic. (Unless we are willing to try out road pricing, which is unlikely given the tepid response to the last few studies of the issue.)

I don’t want to pick on Mr Edmonds in particular. It’s common to hear politicians, bureaucrats, and advocates from all over say similar things. We constantly hear that Project X or Project Y will “fix congestion” or “solve gridlock” or “save us [some unthinkably large amount of money] in congestion costs”.

As an economist, I’m baffled by these statements. The empirical evidence on congestion overwhelmingly shows that it is not possible to reduce it by building more roads. This is because people change their behaviour in response to bigger roads. They shift from walking to the store to driving there; they buy a house further out of town; they travel at different times.

Here’s what two North American economists, Duranton and Turner, had to say on the topic after undertaking a comprehensive, multi-decade study on induced traffic in US cities:

Our data suggests a ‘fundamental law of road congestion’ where the extension of most major roads is met with a proportional increase in traffic. Not only do we provide direct evidence for this law, but also show find evidence that three implications of this law; near flat demand curve for VKT, convergence of traffic levels, and no effect of public transit on traffic levels.

All earlier studies, such as this comprehensive 1998 study of 70 US metro areas over a 15 year period cited by walkable city advocate Jeff Speck, have come up with identical findings:

Metro areas that invested heavily in road capacity expansion fared no better in easing congestion than metro areas that did not. Trends in congestion show that areas that exhibited greater growth in lane capacity spent roughly $22 billion more on road construction than those that didn’t, yet ended up with slightly higher congestion costs per person, wasted fuel, and travel delay.

Consequently, all we can realistically do about congestion is to give people good alternatives to participating in it. Other modes, such as grade-separated rapid transit and walking and cycling, do not get congested in the same way as roads do. While the research shows that providing alternatives to driving does not necessarily reduce road congestion, it does give people a way to reduce their exposure to it.

In light of these fundamental economic realities, it is essential that transport agencies stop talking about “fixing congestion”. This is nothing more than a dangerous fantasy.

Suggesting that we can solve congestion creates unrealistic hopes among the public. Every time a politician or transport agency opens a new road and promises that it will reduce congestion or speed up people’s journeys, they are feeding expectations that can never fully be met.

The result of this is that transport agencies are constantly dealing with demands for more roads that will not actually deliver long-term solutions to the problem of congestion. This sets the transport profession up to constantly fail to satisfy people’s desires and demands. This has to be a tremendously disheartening situation to be in.

My personal view is that instead of talking about “fixing congestion”, transport agencies should instead promise to deliver outcomes that are actually achievable.

This could include, for example, committing to deliver transport choice to underserved areas of the city by investing in rapid transit infrastructure, frequent bus services, and safe walking and cycling infrastructure. While transport agencies would have to work hard to deliver on all this, they could expect that the end result would be more transport choice for residents.

Transport agencies could even commit to some traditionally roads-centric goals, like, say, building new roads to enable the development of a new subdivision at the edge of the city. At least, as long as they weren’t making unrealistic promises of fast, frictionless commutes to the future residents…

Driverless cars to increase congestion

Proponents of driverless cars often suggest the technology will make all sorts of significant changes to transport. Gone will be car ownership with people just hiring a car when they need one, like taxi’s only easier and cheaper. As such they say gone too will be the need for public transport, especially when you take away some of the benefits PT currently has like being able to do other things such as work, read, use a phone or even sleep. Further congestion will also be a thing of the past with these smart vehicles able to better work together rather than the randomness of humans. Of course the biggest and likely most accurate prediction will be safety as for a start these cars will obey the road rules so no speeding, no running red lights or any of the other bad habits human drivers have.

That all sounds wonderful however an article from CityLab highlights research showing that at least for some time driverless cars could actually make things worse on the roads.

A new simulation-based study of driverless cars questions how well these two big secondary benefits—less traffic and more comfort—can coexist. Trains are conducive to productivity in large part because they aren’t as jerky as cars. But if driverless cars mimic the acceleration and deceleration of trains, speeding up and slowing down more smoothly for the rider’s sake, they might sacrifice much of their ability to relieve traffic in the process.

“Acceleration has big impacts on congestion at intersections because it describes how quickly a vehicle begins to move,” Scott Le Vine of Imperial College London, who led the research, tells CityLab via email. “Think about being stuck behind an 18-wheeler when the light turns green. It accelerates very slowly, which means that you’re delayed much more than if you were behind a car that accelerated quickly.”

For their study, Le Vine and colleagues simulated traffic at a basic four-way urban intersection where 25 percent of the vehicles were driverless and the rest were standard. In some scenarios, the driverless cars accelerated and decelerated the way that light rail trains do—more comfortable than, say, riding in a taxi, but still a little jerky at times. In other scenarios, the cars started and stopped with the premium smoothness of high-speed rail.

Within these broad scenarios the researchers also tested alternatives that reduced speeds but improved smoothness, such as longer yellow lights or following distances. All told they modeled 16 scenarios against a baseline with all human-driven cars. The researchers then ran each simulation for an hour, repeated it 100 times, and calculated the average impact that scenario had in terms of traffic delay and road capacity.

In every single test scenario, driverless cars designed to create a comfortable, rail-style ride made congestion worse than it would have been in a baseline scenario with people behind every wheel.

So cars with fast acceleration and deceleration are obviously easy to make but that’s not what people are likely to want if you’re also trying to do some of the other activities mentioned earlier. Regardless traffic generally moves at the pace of the slowest vehicles so all it takes is one slow driver or driverless vehicle and many others will be slowed down too. I bet they won’t say that in the marketing brochures.

The interior of the Mercedes-Benz driverless car concept

 

I suspect this isn’t the only aspect of driverless cars that could create congestion. As an example the driverless taxi model that most people say will happen, is likely to result in a lot more vehicle movements as cars reposition themselves to pick up additional fares. That means that where roads are generally congested in one direction only, with driverless cars congestion could occur in both directions.

Does intensification increase traffic congestion?

Earlier this week, I took a look at the relationship between congestion and density. I was investigating geographer Phil McDermott’s claim, based on some dodgy data comparing between cities, that increasing density would increase congestion.

Economists know that it is difficult to make inferences about causality using cross-sectional analysis. Simply looking at variations between different cities doesn’t allow you to form robust conclusions about how those cities got to where they are.

One of the ways in which economists seek to strengthen their understanding of causality is to look at changes over time. For example, if you observe that increases in density tend to be followed by increases in congestion, then that is stronger (although not necessarily conclusive) evidence that there is a causal relationship.

With that in mind, it is worth asking: How have congestion and density changed in New Zealand cities over time? Unfortunately, we don’t have enough data points to conduct a robust econometric analysis, but we do have enough to start painting a picture of recent changes. We can draw upon two relevant sources:

I’m going to focus on NZ’s three largest cities – Auckland, Wellington, and Christchurch – as two of the three experienced big increases in density between 2001 and 2013. (MoT hasn’t collected data on Hamilton and Tauranga for as many years.) If these increases in density coincided with rising congestion, it may be an indication that intensification can lead to increased congestion.

Here’s the data. It shows that density has risen 33% in Auckland between the 2001 and 2013 Censuses, 17% in Wellington, and a mere 3% in Christchurch:

Changing density in large NZ cities chart

And here’s the Ministry of Transport’s Congestion Index, which measures the average minutes of delay per vehicle-kilometre, relative to totally free-flowing conditions. This is a bit of an unrealistic comparison, as a 2013 NZTA research report by Wallis and Lupton shows. The only way that you can totally avoid all queuing or stopping at traffic lights is if there are no other cars on the road. So it wouldn’t be realistic to say that we could speed up the average Auckland trip by half a minute per kilometre. However, this is still a useful indicator for changes from year to year.

While the Index bounces around a bit from year to year, the overall trends are clear. Levels of congestion are flat or falling in Auckland and Wellington, which experienced big increases in density over the last decade, and rising in Christchurch, which hasn’t gotten denser. In particular:

  • Average delay for Auckland drivers was 25% lower in 2013 than it was in 2003
  • Average delay for Wellington motorists fell 5% from 2004 to 2013
  • Average delay for Christchurch drivers rose a staggering 31% between 2004 and 2010. Unfortunately, MoT’s monitoring seems to have been disrupted by the earthquake, but anecdotal evidence suggests that congestion has worsened since then.

MoT Congestion Index chart

In short, data on changes in density and congestion in New Zealand cities contradicts the notion that intensification will necessarily cause worse traffic congestion. If anything, it suggests that rising density may do the opposite, by making it more feasible for people to walk, cycle, or take public transport.

Do we need to treat this data with caution? Most certainly. As I noted earlier in the week, there are a number of omitted variables that influence congestion, such as such as changing consumer preferences, macroeconomic changes, and significant investments in both roads and public transport over the last decade. But it does suggest that wild claims about the negative traffic impacts of new apartment buildings should be taken with a significant grain of salt.

What do you make of this data?

Arguing for sprawl with “strategic misrepresentations”

A number of recent posts have taken a look at some of the “strategic misrepresentations” that people have used to argue for a sprawled-out, roads-focused Auckland. We’ve taken aim at some of the common fallacies, including:

A while back someone sent me an article by geographer Phil McDermott that really hits the trifecta of fallacies. He argues that building apartment buildings on arterial roads – precisely where they will have the best access to frequent public transport services on Auckland’s New Network – is a bad idea because it will lead to increased congestion on the roads.

McDermott’s argument is long on subjective judgments (young people may want apartments but old people downsizing from big suburban homes never will!) and short on quantitative analysis. Here’s his key piece of evidence that constructing apartments on arterial roads will inevitably lead to more congestion:

Congestion – the elephant in the apartment

That might be just as well because mindlessly boosting residential development on arterial roads promises simply to compound Auckland’s congestion problems.

We know higher densities are associated with higher congestion. Auckland’s geography means it already performs poorly on this count. The Tom Tom Congestion Index confirms this.

When the 2013 congestion index for 65 American and Australasian cities is plotted against population density (sourced from the Demographia website) Auckland sits among the worst performers – Vancouver, Sydney, Los Angeles, and San Francisco (Figure 2).

Figure 2: Population Density and Congestion

McDermott density and congestion

This is not a serious piece of analysis – it is an insult to econometricians. McDermott makes three elementary errors in this short excerpt alone.

First, he uses bad data that misrepresents levels of density and congestion in these cities. Matt has previously taken a look into the guts of the TomTom Traffic Index and found that it is not a useful measure:

It measures the difference in speed between free flow and congested periods. That means cities with lots of all day congestion there isn’t as much of a difference between peak and off peak times and therefore they get recorded as having less congestion.

Likewise, I’ve done some empirical work on population densities in New Zealand and Australian cities that has showed that Demographia’s statistics are similarly meaningless. Demographia measures the density of the average hectare of land in the city, rather than the density of the neighbourhood in which the average person lives. Nick has shown how badly these figures misrepresent the actual density of New Zealand cities:

Auckland Wellington Christchurch charts_Page_1

Second, McDermott omits important variables and makes inappropriate inferences about causality. While he observes a correlation between two variables, that’s hardly sufficient to prove that building apartments will increase congestion. The causality could very easily run the other way. For example, it could be the case that the presence of congestion creates an incentive for people to live closer to employment and amenity. If that’s the case, then McDermott’s preferred policy of banning apartment developments would make Aucklanders much worse off by preventing them from minimising their travel costs.

Another possibility is that the relationship between density and congestion is mediated through other factors. Both may be caused by a third variable that McDermott has omitted, or there may be an intermediate step between density and congestion. (Or, as noted above, the measures themselves might be rubbish.)

A while back, CityLab’s Eric Dumbaugh provided an excellent illustration of the complex nature of congestion. He looks at data on US cities and finds that higher congestion is associated with higher, rather than lower, levels of productivity:

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.

Dumbaugh congestion and productivity chart

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.

In light of these counterintuitive relationships, the simple two-variable OLS regression that McDermott is relying upon is almost certainly misleading.

Third, McDermott fails to recognise that people are less exposed to congestion in denser, mixed-use cities. It’s simple: when people have better transport choices – i.e. access to frequent bus services and rapid transit, and safe walking and cycling networks – it doesn’t matter as much that the roads are congested. Increasing Auckland’s density by constructing apartment blocks and terraced housing on arterial roads will make it easier for people to have those choices, because the arterial roads are where the frequent bus services under the New Network will go:

Frequency is freedom

Frequency is freedom

Furthermore, density allows people to be closer to where they want to go. I find it odd that McDermott (and others) underestimate the importance of physical proximity in cities, even as people are paying high prices for the privilege. Building more homes in the areas that are accessible to jobs and amenities will allow more people to choose proximity over long commutes. (Without preventing others from making a different choice.)

A question for the readers: Would you rather have a 40 kilometre commute travelling at 80 km/hr, or a 5 kilometre commute moving at 30 km/hr? Show your work…

Fact-checking hyperbolic arguments for more roads

Following the gridlock on the roads last Saturday, the NZ Herald published several perspectives on how Auckland should cope with disruption to its transport networks. Matt weighed in with an excellent piece on the need to build Auckland’s long-awaited rapid transit network, which would give people an alternative to congested roads. However, the Herald “counterbalanced” it with some arrant nonsense about the need for more motorways by University of Auckland associate professor (and prominent climate change denialist) Chris de Freitas.

I use the term “nonsense” for good reason. The article was rife with factual errors that undermined the points that it was trying to make. Let us count the mistakes.

One: Congestion does not cost the Auckland economy billions each year.

De Freitas contends that:

The cost to the region’s economy of traffic delays is estimated to be many billions of dollars a year, which does not include the mental anguish caused to frustrated and angry drivers.

He does not provide any citations for this figure. However, I am aware of the relevant research, including a 2013 NZTA research paper by Wallis and Lupton that found that a more realistic figure for the cost of congestion in Auckland was a mere $250 million:

Including all congestion cost components, we concluded that the costs of congestion in Auckland are approximately $1250 million per year when compared with free-flow conditions, or $250 million per year when compared with the network operating at capacity.

In other words, the only way we could achieve that hypothetical $1.25 billion saving in congestion costs would be to build a network far, far in excess of what is required to move vehicles. Furthermore, Wallis and Lupton’s estimates are derived using NZTA’s Economic Evaluation Manual procedures, which explicitly account for non-monetary values such as travel time and driver frustration. The actual financial costs of congestion are likely to be an order of magnitude lower – i.e. closer to $25-50 million. That’s just not a lot compared to Auckland’s regional GDP of $75 billion.

Two: Auckland is not adding a Dunedin worth of population every 3-4 years.

De Freitas asserts that:

Given that the region’s population continues to expand by the size of Dunedin every three to four years, the vulnerability to traffic snarl-ups will grow exponentially.

According to the most recent Census data, Dunedin has a population of roughly 120,000 people. Between 2001 and 2013, Auckland’s population increased by approximately 255,000 people, or roughly 21,000 people per year. For those who like numbers, that means one new Dunedin every six years, not every three years. De Freitas seems to think that Auckland is growing twice as fast as it actually is.

Furthermore, the Ministry of Transport’s Congestion Index shows that travel time delay actually fell by one-quarter between 2003 and 2013. This contradicts de Freitas’ claim that congestion will increase “exponentially” as population grows – why hasn’t it increased over the past decade?

Three: Rapid transit networks are well-suited for regions with natural choke-points.

De Freitas argues that geography is destiny, and that Auckland’s skinny shape makes it a natural for roads:

Public transport itself will not ease the region’s traffic crisis. Auckland’s geography, history and politics make it a unique case for infrastructure planning. Its long, thin shape led to the earliest transport routes developing along a narrow north-south axis. Strategic arterial roads followed this pattern.

He correctly observes that road networks become less efficient when they are forced through natural choke-points like harbours and portages. However, these choke-points actually make public transport more efficient, not less. Putting more cars on a single road causes congestion and makes that road less efficient, but putting more buses or trains on a single right-of-way increases efficiency by allowing them to share costly infrastructure.

Four: Auckland’s motorway network already has alternative routes.

De Freitas contends that the Auckland motorway network lacks redundancy:

The result is a highway system that is not yet part of a fully integrated network. It is linear with no alternative routes around major bottlenecks. Traffic that would want to bypass the city is forced through Spaghetti Junction, adding to the vulnerability of the system to gridlock.

He has apparently not noticed that NZTA has almost finished building a bypass of Spaghetti Junction at a massive cost of $3.6 billion – the Western Ring Route. Perhaps he hasn’t been out west in the last decade, but if he had he would have noticed the construction of SH18 and the Upper Harbour Bridge, major expansions of the SH16 causeway, and the in-progress construction of the Waterview Connection to link SH16 with SH20.

Do we have to cover the whole region in asphalt to satisfy the man?

Five: A major earthquake in Auckland is extremely unlikely.

De Freitas raises the spectre of a Christchurch-esque quake:

The region’s most strategic arterial roads are vulnerable during earthquakes. Older multi-span bridges and abutments along motorways such as around Spaghetti Junction would be most vulnerable to damage from ground liquefaction. Even minor damage to these would bring city traffic to a halt.

Now, I’m no geologist… but both of my parents are geophysicists who started out researching Auckland’s rocks. They do not believe that Auckland faces serious risks of earthquakes. Volcanoes are a stronger possibility, of course, but volcanic activity doesn’t cause soil liquefaction. Here is a map from the British Geological Survey of every major earthquake in New Zealand since 1843. Notice the total absence of any recorded earthquakes anywhere near Auckland. Unlike Christchurch, we are not close to NZ’s fault lines:

Source: BGS

Source: BGS

Six: More roads are not a good solution for disaster readiness.

De Freitas argues that more roads are needed to evacuate Auckland:

The vulnerability of a city is to a large extent a function of the adequacy of preparedness planning. How soon could Auckland be evacuated?

There is limited motorway access out of the isthmus that is the Auckland urban area, so there few alternative exits. Main feeder roads head for one major harbour crossing and easily become congested.

Some American cities that are vulnerable to regular natural disasters have tested the “more roads” approach to evacuation. So here is Houston, attempting to evacuate on one of its eighteen-lane freeways during Hurricane Katrina in 2005. Not a lot of people actually made it out of the city:

Houston-HW_600

We could devote endless hectares of increasingly valuable land attempting to repeat the same solution that failed Houston. Or, if we think that natural disasters are a serious risk, we could invest in disaster preparedness and civil defense to ensure that the city’s residents will still have access to food, water, and health care services, regardless of what happens. That’s likely to be a much more practical, cost-effective solution.

Finally: The Herald needs to get better at fact-checking, or print a retraction.

While de Freitas’ article was printed in the op-ed page, that is no excuse for its blatant errors and omissions. Auckland only has one newspaper of record, and its credibility and usefulness to its readers is undermined when it prints this sort of gibberish.

Need to build missing modes to avoid congestion

Yesterday large parts of Auckland’s Motorway network was brought to its knees by a single crash.

A serious crash brought Auckland’s motorway network to its knees with motorists stuck in grid-locked traffic for up to four hours.

Three motorbikes and a truck collided on Auckland’s Harbour Bridge about 12pm yesterday, leaving two motorcyclists with critical injuries and a third with serious injuries.

Three northbound lanes were closed while emergency services attended the scene of the crash.

Auckland motorists were stuck in grid-locked traffic, making a normally 40-minute journey from the airport to the North Shore take up to three hours.

The tail of the traffic jam on State Highway 1 stretched from the base of the Harbour Bridge to Highbrook Drive, Otahuhu, before all lanes were re-opened at 3pm.

Traffic on the Northwestern Motorway was very heavy, with motorists diverting trips they’d usually take on the Northern Motorway in an attempt to avoid the snarl up.

Roads throughout Central Auckland were also backed up as motorists tried to get on the motorway and became stuck.

Unfortunately I didn’t get a screenshot but at one stage the motorway traffic map looked like this with a considerable amount of red as well.  In addition local roads all around the motorways would have been severely affected too.

Motorway affected

While the crash is unfortunate – and I hope those involved are ok – as I say in the article, there is very little that could be done to prevent the ensuing chaos it caused. We’ve seen in recent years the motorway network brought to a standstill numerous times by accidents and this is especially the case when they occur on some of the busiest sections of the network.

I happened to be travelling towards the city about 1½ hours after the Harbour Bridge was reopened and SH16 was still at a standstill all the way from Te Atatu to the city which also showed just how long the delays took to clear.

Yesterday’s incident also shows highlights that even an additional harbour crossing wouldn’t have helped. As people tried to avoid the hold up they flooded to use the North-Western Motorway and that too soon jammed up. With an additional crossing the same thing would have happened as masses of people diverted their trips to avoid the bridge. It’s also worth pointing out that the opening of the Waterview Connection isn’t going to make this any better either as the project is expected to see traffic volumes on the motorway increase. This is due to new trips being generated thanks to the connection as well as a lot of trips shift from local roads on to the motorway network. The result would be even more people stuck in congestion – many deep underground.

So what can we do?

What we need is a comprehensive multi modal network that is able to deliver real choice to Aucklanders in how they get around. That means a network like the Congestion Free Network as well dedicated walking and cycling options like Skypath combined with safe routes on road across the region. Those alternative networks won’t mean that everyone is going to suddenly use them or that people driving won’t suffer from congestion at times but it does mean that people can have a realistic option to make trips around the region knowing they won’t have the risk of suffering from congestion. As yesterday’s experience also shows, the key is also they are isolated from the rest of the road network. Because there is no dedicated route for buses over the harbour bridge all North Shore services were equally caught up in the chaos disrupting them too.

CFN 2030 South-GraftonNote: we’ll be creating a new version to incorporate the change to the CRL with Mt Eden soon.

A true multi-modal transport system is also a resilient one so let’s get on and build those missing modes.

Engineers versus … everyone else?

How do you define “optimal conditions” in a transport sense? The graphic below paints a stark difference in opinion on what constitutes “optimal conditions” for different professions:

LOS

Image from Patrick Kennedy, D Magazine, http://streetsmart.dmagazine.com/2014/11/07/age-of-enlightenment/

Now I’m both an engineer and an economist, so feel I have some insight into the motivation for whoever developed this graphic.

It highlights a very important issue: Engineers tend to measure performance using indicators that measure mobility, whereas economists tend to measure performance using indicators that measure value.

Now don’t get me wrong: I strongly believe that mobility has a value. I write this having just fanged up and down the northern motorway taking some visiting Australian guests to Tawharanui. But it’s not the only thing I value. Indeed, tonight I will take them to Fort Street for dinner at Ima’s.

I accept that what constitutes “optimal conditions” will change depending on the context, and that in some contexts mobility has a very high value. What I can’t fathom is why the transport/traffic profession have developed such simple and inflexible performance indicators to guide their work.

I’m going to say this right now: Level of service tells you *nothing* about what people value. Why? Because it’s measured independently of the costs associated with being able to move freely. We could, for example, enjoy great LOS if we bulldozed the entire city and replaced it all with twenty-lane motorways connecting to vast carparks, with the occasional office building or house dotted amongst the seas of asphalt. But I think it’s obvious that would be a really, really bad outcome for almost everything else that we value.

From an economic perspective, congestion in cities can be seen as a good thing. It’s an indicator that lots of people are using the city in lots of different ways – going to work, travelling to see friends or family, going shopping, visiting sports games or art museums etc. Congestion has costs, of course, but eliminating it entirely would be even more costly.