Examining the causes of induced demand and the future of highway expansion
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Policy Brief

Examining the causes of induced demand and the future of highway expansion

The most effective method for reducing induced demand is to implement pricing on highways.


As auto travel and the economy recover from the COVID-19-related slowdown, transportation planners and engineers will need to decide how much new roadway capacity to build. In the post-World War II years, the U.S. built thousands of miles of highways—40,000 miles of Interstate highway alone between 1956 and 1980. However, the country has added significantly fewer miles over the past 40 years.

One reason that highway construction slowed is the growing challenge of building roadways, particularly in urban areas. Starting in the late 1960s, community groups began protesting the construction of Interstate highways, some of which divided neighborhoods. These protests led state departments of transportation (DOTs) to cancel numerous freeway projects and, along with the growing concern about the environment, gave power to anti-roadway and “smart growth” groups.

Over time, groups opposed to highways have become more sophisticated as social justice groups, residents opposed to development (also known as Not In My Backyard, or NIMBYs), and opportunistic politicians have joined forces.

One justification these groups have for opposing new highway capacity is a concept called induced demand. Induced demand is the notion that when you add new capacity to a congested highway, that improvement reduces congestion, which then leads to more people opting to travel and the return of congestion.

While induced demand exists in some circumstances, smart growth groups often exaggerate the magnitude of induced demand or claim it exists when some other factor, such as rapid population growth, is causing the congestion. They also fail to appreciate how, even if congestion returns, a highway can accommodate more travelers after it is widened. The purpose of transportation systems is not to reduce congestion, but to provide mobility.

Increasing demand for travel leads to the need for new capacity, not the other way around.

As detailed in Part 3, the following five factors lead to higher travel demand:

  1. Growth in demand attributable to population, employment, or new activities in the
    market area served by the roadway
  2. Redistribution of existing travelers geographically across the roadway network to
    optimize travel routes
  3. Altered travel times that take advantage of additional capacity at preferred travel
  4. Modified travel modes resulting from new roadways or missing links in existing roadways
  5. New trip generation or trip length increases as trip distribution patterns change

Only the latter two are legitimately induced demand. And only demand associated with new trip generation or increased trip length is a significant contributor to induced demand.

At the same time, all five sources of demand for new capacity are driven by the benefits of additional travel. New capacity brings many benefits as well as costs, and all have to be evaluated.

While induced demand was a significant concern in the 20th century, the shifting nature of travel, including the increase in working at home and growth in the services economy, is likely to reduce induced demand in the foreseeable future. Further, induced demand is not always bad, because new capacity creating the demand allows folks to travel when and where they want, creates economic activity, and improves safety.

This brief begins by providing a history of induced demand. Then, it examines different scenarios to see when induced demand is an issue and when it is not and how that affects the benefits of a capacity expansion.

Next, this brief explores how current and future travel patterns are likely to lessen induced demand. After that, it highlights the advantages of induced demand and compares how society views induced demand of highways compared with induced demand in other areas.

Finally, this brief provides some policy suggestions on how to reduce induced demand.

Full Policy Brief: Induced Demand’s Effect on Freeway Expansion