"Market demand should decide how transportation taxes are spent."
This was my theme during yesterday's BDA panel discussion on ST2. Both the Seattle Times and PI have coverage of the event.
This idea is part of WPC's 5 Principles of a Responsible Transportation Policy, which we released earlier this year.
In economics, supply is a function of demand. This means a willingness to use a service must exist before a supply of that service is created. Boeing executives do not make 300 airplanes knowing they will only sell 100. Likewise, governments should not spend a disproportionate amount of taxes in low demand sectors, where the willingness to use the service does not justify the investment.
European transit systems provide a good contrasting example of how these economic concepts apply.
In Switzerland, transit is successful, not because of the amount of service or infrastructure, but because the country has certain demographic and economic characteristics that induce demand.
In other words, there is an existing market with a customer base and Swiss policymakers responded with proportional infrastructure investments. As a result, mode share, ridership and fare box recovery are high.
In the United States, transit resources are distributed in just the opposite way. Under the “build it, and they will come” theory, policymakers think that increasing the supply of transit will somehow create more public demand. This speculative model fails because most U.S. cities do not posses the economic or demographic characteristics that create enough voluntary consumers for public transit.
Using the economic principles of supply and demand shows that building excess transit capacity before there is an equal amount of willingness to use it leads to an underperforming system. As a result, mode share, ridership and fare box recovery are low.
When prioritizing transportation projects,policymakers should use consumer demand to drive investments, not the other way around.