Most transport projects, particularly when it comes to widening motorways or building new ones, derive the vast majority of their estimated ‘benefits’ from the travel time that they will supposedly generate. These “time savings benefits” form the core of most transport cost-benefit analyses that are undertaken – even for public transport projects, where it would seem the biggest apparent benefits of investing money in public transport is to free up traffic movement on the roads.
For example, if we look at the cost-benefit analysis undertaken for the Waterview Connection project (a previous iteration of it, but the benefits will be exactly the same) – there’s a huge amount of estimated ‘time savings benefits’:
Time savings benefits are calculated by working out the amount of time a project would save a particular user, then multiplying that up by the number of users who will benefit. Then a ‘dollar value’ is put on each hour saved (I forget the exact amount). Then you multiply that up by 30 years, apply a discount ratio and voila, you have a big amount of monetary benefit that your project will supposedly create, and therefore it’s justifiable to spend, in the case of the Waterview Connection, almost $2 billion on the project and the associated SH16 widening.
But does that work? Does that really make sense? I know the good old saying that ‘time is money’, but does that apply to all trips? Is there really a monetary benefit to the economy from me being able to get to my friend’s house a few minutes faster on a Sunday afternoon? Is there a benefit to the economy of me being able to get out of bed 10 minutes later that would otherwise be the case, but still get to work on time (if I used this route to get to work).
I can certainly see a monetary benefit in business trips being able to be made quicker and also from it being quicker to shift goods around. But what percentage of trips are actually business trips – as opposed to commuting trips, leisure trips or just general ‘errands’ trips. According to a study done by the ARC back in 2009, in 2041 only a relatively small percentage of trips are business or freight trips – with the biggest number actually being simple ‘errands’ trips. The proportion is fairly similar to what we have today (though future proportions are more important as we build new projects for the future).
But is there really a big benefit to the economy of being able to get your kid to school quicker, or being able to get to the supermarket for shopping a few minutes faster than before?
Certainly, there’s likely to be a ‘quality of life’ improvement that comes from spending less of your life getting from A to B. I’m going to be reluctant in moving from where I live now, because I’m able to get out of bed at 7.45am in the morning and still make it to work on time. There’s a quality of life benefit for me in that sense. Similarly, there’s a quality of life benefit in making many other commuting, or errands, or leisure trips a bit quicker. Nobody really ‘likes’ spending time in traffic congestion: it’s frustrating, it feels like a waste of time and so forth. But does it really adversely affect the economy to the extent that we see numbers like “congestion costs Auckland a billion dollar a year!” being floated around? I must say I’m a bit sceptical – particularly when it’s actually damn near impossible to completely eliminate congestion (so what does the billion dollars actually compare against?)
For many households in Auckland, there’s something else annoying that they have to spend much of their life doing – something which probably has a reasonably significant adverse effect on their quality of life actually. And that is doing the dishes. Fortunately, I live in a house with a dishwasher, and therefore don’t need to waste 20 minutes a day (or as it tended to be, two hours once a week!) on doing the dishes. Not having to do that improves my quality of life quite a lot. I can play around on the computer a bit longer in the evenings, I feel less stressed about life as I don’t have a “I must do the dishes” feeling eating away at the back of my mind and so forth.
So we can readily accept that if all households in Auckland had a dishwasher, the people in those households would have a lot more free time, a lot less stress and so forth. In fact, they would benefit in many of the same ways (and perhaps to an even greater extent) as what transport projects like the Waterview Connection will supposedly provide. Plus, if we estimate that there are around 700,000 households in the Auckland region, that say 40% already have dishwashers and that a new dishwasher costs around $1200, we could buy every remaining household in Auckland a dishwasher for a grand total of just over $500 million. That’s around a quarter of the price of the Waterview Connection!
This may sound like a bit of a silly proposition – to compare the need for transport projects with the need for dishwashers – but it raises a very valid point: what real value are we getting for our transport spend, and what better ways might there be of achieving the same benefits? Perhaps we should subject transport projects to a simple “why not just buy a dishwasher test”? Projects that make good sense, like the CBD Rail Tunnel, clearly pass that test as they are all about encouraging economic agglomeration benefits, improving productivity, generating higher wages and so forth. That may also be true – to some extent – for projects like the Waterview Connection.
If it is true, then why aren’t we measuring that? Why aren’t we measuring the real benefits for the economy instead of time savings benefits, something that could be more cheaply and easily achieved by simply buying households dishwashers?
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Well put. Just to tease out a few related points:
– It is quite fair to value travel time in transport studies. But it should reflect the actual value of time for the various different trip purposes. The value of time is people’s willingness to pay to save it. What would you be willing to pay to save 15 minutes on a congested daily commute? Something, no doubt. What would you be willing to pay to save 15 minutes on a weekend jaunt to a picnic ground? Possibly nothing, if you enjoy the drive. An economic evaluation should ideally account for these differences.
– Whether very small increments of time should be valued is debated. It may seem odd to do so (do you really notice saving one minute of your commute?), but if you don’t the result is perverse – a single large time saving from a big project is valued, but the same time saving achieved in small increments over time is not. Or 10 people saving 10 minutes is valued at more than 100 people saving 1 minute.
– Public transport supporters are fond of pointing out that the time saving from road projects is eroded as traffic increases until congestion returns to its equilibrium level. This is true. But the implication that the value of the time saving has been destroyed is not sound. Let us disregard population increase and assume that the traffic increases as people change their habits to take advantage of the better road – for example, by driving further or more often. They are trading the time saving for whatever benefits they get from their changed behaviour (eg greater choice of activities, greater choice of home and work locations) – and the benefits they get must be equal or greater, or they would not make the trade.
So it is not right to say that as congestion returns to its former level the value of the initial time saving has been destroyed. People still have whatever benefits they are getting from their changed travel behaviour. HOWEVER, when they trade the initial time saving for more travel, they are creating NEW external costs of congestion imposed on others. This cost of induced demand should be included on the debit side of the road project.
Also however, the analysis above is simplistic in that it doesn’t consider the self-perpetuating nature of car-dependent urban sprawl. Some of that extra travel may not really be voluntary, but is a response to an environment which, because of car-dependent planning policies, now REQUIRES more travel to maintain the same quality of life. You used to walk to the deli, but now you have to drive to the out of town mall because it has driven the deli out of business. Involuntary extra travel is not a benefit.
Comparing car dependent post WW2 western Sydney with more densely populated, more transit oriented older Sydney – in the west people travel much further much faster (of course) AND spend more time travelling, than in the older areas. To what extent are they doing this willingly for the sake of the benefits of a lower density lifestyle or cheaper fringe housing? To what extent are they doing it grudgingly because their environment makes it unavoidable? (interesting comment on this for Melbourne at melbourneurbanist.wordpress.com/2010/10/27/do-higher-travel-costs-make-the-fringe-unaffordable/#comment-1300
And I have never understood why private benefits are calculated, but private costs aren’t – vehicle costs like depreciation and maintenance, petrol and insurance. You can’t just assume that everyone owns a car already. Even if you did the bcr should include direct running costs per km.
How much of the “billion dollars a year” is the cost of fuel burned going nowhere? Fuel’s not cheap, and getting worse, and we all know that nothing is worse for fuel efficiency that stop-start-stop-stop-stop-start-stop driving. Cars do better when they’re moving, normally their best when they’re in the 80-90km/h range, and commuter crawl is horribly inefficient.
However, in the case of the Western Ring Route (ignoring the widening, which I think is wasteful if it’s not going to be used for bus lanes), it’s not just commuter crawl that it’s tackling. It’s also tackling the gaping void between motorways that encompasses the inner-western suburbs, and the extended loop or stop-start horror through the ‘burbs that’s required to get to the airport. That’ll have some pretty dramatic fuel consumption benefits for the region, even without travel time savings, and those benefits accrue at any time of the day, any day of the week. They’re more pronounced for commuters, but very present for anyone who currently has to loop out through CMJ or else creep their way through Avondale, Mt Roskill, St Lukes, etc, to go from west to south.
While it is true that on a per vehile, per kilometre basis, reducing congestion saves fuel, studies show that cities with the least congestion tend to use the most fuel per capita. This is because the population is more inclined to drive, and they drive further.
Cities with minimal congestion tend to have smaller populations leading to lesser-quality public transport, too. Auckland will always have the worst congestion in the country, because it’s got a third of the population. Nelson, New Plymouth, Invercargill, their congestion problems will wax and wane but, mostly, they’ll have less congestion because they’re smaller and they’ll also have lower-quality public transport and thus require people to drive in order to get anywhere.
The other consequence of being smaller is that if you have a need for specialist goods or services you’ll likely have to go out of town to get them, be it medical care or consumer products. Need an MRI? Gotta go to the nearest major hospital. “Need” a high-end luxury car? You’re probably going to have to go to the nearest big city. And that means driving, since the odds of there being convenient public transport options are minimal.
The ‘billion dollars a year’ is a complete fiction cooked up mostly be the media and helped along by the likes of John Banks and other politicians that like a nice big round number to support their ideology. Even Don Brash used this figure, and as a former govenor of the Reserve Bank there is no way he could have actually believed this financial fiction.
It comes from rounding up a very simply calculation, the average time spent in traffic multiplied by the average wage. Their are two major problem with this approach: Firstly it isn’t acutally based on the time effects of congestion, it it is based on the time spend driving in total. Removing congestion entirely, even if it were possible, would not mean people’s commutes took 0 minutes, the lions share of the time is still based on the actual time taken to drive the distance. So it’s basically a measure of the ‘cost’ of commuting in general, not congestion.
Secondly, as Admin touched on above, we can’t actually price people’s time behind the wheel at the same price they get paid to work. People still do the same amount of work, and get paid the same amount, regardless if it takes them 30 minutes to get to work or 45. So really we need to work out the price of lying in bed for fifteen minutes, or spending a few minutes with the kids before school, or lingering over a cup of coffee rather than gulping it down. While those things may be valuable to the individual and society as a whole, they have negligible impact on the economy.
The idea that removing congestion would grow the Auckland economy by a billion dollars a years is complete cobblers.
I wonder if there has been a study to compare roads vs Public Transport along the same corridor. I’m asking because it seems that roads have been put into their own special category that is exempt from comparison with other modes.
In a transport plan, you would ideally a) define the problem, b) dream up a number of alternative solutions (car, bus, train, LRT) and then compare them directly. This doesn’t seem to happen. The public transport studies are about mode vs mode, while the car ones never appear.
When was the last time people saw a plan that had a corridor and there was consideration for all the options (including car), compared side by side?
I agree with commenters about valuing time, even though it can’t be “cashed in”. Imagine if time was not valued, that is value of time = 0. This would suggest that if we delayed someone 1 hour in their vehicle (whatever that vehicle may be- car, bus and so on) that they would not care. Of course, we know this is false, and therefore time must have a value.
Even if the time savings from any transport project fall to zero (i.e. no difference, no matter what route you take), you still have added capacity, and so can transport more people, and depending on the project, you might have added more options to the “destination menu” of people who use it.
(i’m trying hard to be mode neutral in my post!)
I’m not saying we shouldn’t value time at all, we just need to be smarter about how we do it. The value of a freight truck is clearly different to someone going for a Sunday drive.
Don’t they just average all the values to get an average value so that everyone is on average better off?