Comment of the week: Induced demand is free fast food

In a lively comment debate over Herb Caudill’s article on car depen­dence, some readers argued that “induced demand,” the principle that new or wider roads rarely relieve congestion, is no reason to eschew major highway projects; rather, this just shows latent consumer demand for more lane miles. Reader Jacob raised a thought-provoking analogy:

Let’s give everyone free McDonald’s hamburgers. Let’s put 10,000 hamburgers a day on a table in front of the Capitol (or wherever).

What would happen? People would take and eat the hamburgers, and once word got out, all 10,000 hamburgers would be taken very quickly every day. We may thus infer that because people need food and they really seemed to like those burgers, McDonald’s hamburgers are an important public good.

A city planner might notice a problem: those 10,000 hamburgers just aren’t enough. They get taken very early in the morning, so not everybody has a chance to get a hamburger. The obvious solution — because burgers are a highly-valued public good — is to provide more free burgers. So the city planner starts to provide 20,000 hamburgers a day.

You can see where this is going. People start going out of their way to get the free hamburgers, and planning their day around that trip. The city has to keep providing more and more free burgers — eventually millions a day — to keep satisfying the demand for free hamburgers. The competing food markets crater, because who would pay $2/lb for apples when you can get as many free burgers as you want (although maybe you have to wait in a 30-minute line).

Public health goes to hell, because everybody’s eating six burgers a day. And yet, everybody likes their free burgers and the Hamburger Department is an untouchable political powerhouse. Proposals for a 10-cent hamburger fee to cover the huge costs of hamburger provision get shot down by public outrage.

What’s the problem here? The problem is that food is indeed a necessity, and yes, people seem to like McDonald’s hamburgers — but the fact that people will take free burgers does not prove that they are “highly valued” by the market. We are not seeing actual demand for burgers. We are seeing induced demand for a good which is being provided at artificially low prices.

But for some reason, replace hamburgers with roads and everybody goes nuts.

In short, the fact that a new lane or road immediately fills up with traffic does not “prove” that there was a high demand for that road — it proves that people will use way too much of something that’s free.