Econometricians and Hollywood producers have one thing in common: We make a living pitching cool counterfactuals. My whip smart (and recently tenured) colleague Michael Anderson has a new paper which answers the question of how congested LA highways would be in the absence of LA’s subway (and bus) system. The answer to this question is important, as transit systems receive large amounts of public funding and had previously been thought to provide little congestion relief since they account for only 1% of VMT nationally. The paper shows that the opposite is true. The intuition is simple:
“Transit is most attractive to commuters who face the worst congestion, so a disproportionate number of transit riders are commuters who would otherwise have to drive on the most congested roads at the most congested times. Since drivers on heavily congested roads have a much higher marginal impact on congestion than drivers on the average road, transit has a large impact on reducing traffic congestion.”
Anderson tests this hypothesis by using a 2003 strike by Los Angeles County Metropolitan Transportation Authority (MTA) workers, which shut down bus and rail lines for 35 days. He examines hourly data on traffic speeds for all major freeways in LA and finds that there is a sharp 47% increase in delays during peak periods. The results are consistent with his intuition: he finds the strongest effects on routes near transit lines with heavy ridership during peak periods and no effects in areas with no rail service.
“Our estimates imply that the total congestion relief benefit of operating the Los Angeles transit system is between $1.2 billion to $4.1 billion per year, or $1.20 to $4.10 per peak-hour transit passenger mile.”
While it is hard to imagine that a big time Hollywood producer will pick up on this story, this paper is another example where the mode choice of the marginal commuter has significant implications for everyone else on the road. While we teach the concept of congestion externalities to all economics undergraduates, determining their magnitude is extremely difficult. From a central planner perspective, this paper changes how we should view public transit systems in congested urban areas. I find this topic fascinating and think more of us should work on this important issue.