Flashback Saturday: I want to be a super transport model

Every weekend we dig into the archives. This post by Stu was first published in November 2015.

In Matt’s recent post about MoT’s work on the future of transport, there was an interesting little side-discussion about transport models, and in particular the travel demand forecasts which emerge therefrom.

We’ve previously written about the accuracy of transport models when used for project evaluation purposes. Perhaps the most notable (notorious?) was this post on the Waitemata Harbour Crossing, where we discussed how NZTA’s business case used traffic volumes that were approximately 10% higher than actual volumes. Naturally this led to the benefits of the project being overstated.

More recently, this post on the SH20 Manukau Harbour Crossing found it was carrying approximately 45% less traffic than projected 10 years after it was complete.

Transport models are important not just for the purposes of project appraisal. The outputs of transport models are also used to forecast aggregate travel demands and determine policy at a much higher level. For example, the MoT and the NZTA use (different) transport models to forecast aggregate vehicle kilometres travelled, which in turn determine the funding that is available in the NLTF to fund the projects identified in the NLTP. Hence, our ability to plan ahead is influenced by transport models.

In this context, graphs such as the one below are something of a cause for concern.

But let’s not be to critical of the MoT and NZTA; they are not alone insofar as their transport models have consistently over-estimated demand. Graphs surprisingly similar to that above exist in the US and the UK; one such example is shown below.

In some earlier posts here and here, we’ve presented some possible reasons for what might be causing the transport models that are used for forecasting travel demands (both at the level of individual projects and in aggregate) to get it wrong. The systematic positive bias in forecasting errors has been the subject of formal academic research led by the Danish economist Bent Flyvberg. I presented a paper at last year’s IPENZ Transportation Conference in which I discussed some of these issues in more detail, while Peter wrote an excellent post on the topic here. His analysis of NZTA data suggests that New Zealand may not be immune to the same systematic biases found overseas.

This post, however, is not about the systematic positive bias into transport models. Instead, this post is about whether the mechanics of the models are capturing what they need to capture in order to formulate accurate predictions. I think this is a useful starting point for thinking about “transport futures”, as the MoT seem keen to do.

I also think it’s fair to say that the superficial explanation for the slowdown in the growth of aggregate vehicle travel is that per capita vehicle travel has been on the decline. That is, people (both in New Zealand and overseas) aren’t driving as they used to. But this doesn’t get us very insofar as predicting the future, i.e. observing that per capita demands are declining simply begs the question of why?

And this is exactly where things start to get interesting. In my time thinking about these issues the views that are expressed tend to be readily grouped into one of three broad categories, which I now present for you to consider.

First we have what I call the “establishment view“, which is led by the likes of the MoT, the Government more generally, and a number of consultants. This view argues that the decline in per capita vehicle travel primarily reflects higher fuel prices and reduced economic activity over the last 5-10 years. There’s obviously some logic to this view; it seems reasonable to suggest that both the cost of fuel and the state of the economy will impact on travel demands, at least in the short term (say 1-5 years). Where the establishment view struggles, however, is to explain why the slowdown in vehicle travel started so early (way back in 2005), and why volumes haven’t bounced back more strongly of late. The latter is particularly interesting given NZ’s robust levels of economic growth, strong population growth, and sustained low fuel prices.

While VKT is currently growing again, it doesn’t seem to be growing by as much as one might expect based on these factors.

Which leads me to the second view, which I call the “wider socio-economic view“. This is probably the position which best describes my own views, at least in terms of understanding travel demands in the medium term (say 5-10 years). This view looks beyond the hard economic factors considered by the establishment view and instead consider some wider factors that seem likely to impact on the demand for vehicle travel. People who subscribe to this view will often talk about the following issues:

• Demographic factors, such as an ageing population and changes in the number of people with drivers licences;
• Transport and land use factors, such as availability of public transport and the ongoing intensification of our cities; and
• Vehicle substitutes, such as air travel and telecommunications.

The wider socio-economic view complements the “establishment view” in some senses, because it appeals to similar micro-economic mechanisms, but it does so in a way that allows for a wider range of factors to impact on the demand for vehicle travel. In doing so, however, the socio-economic view can lead to predictions that are quite different to those of the establishment view. Instead, the socio-economic view allows quite a lot of room for future growth in aggregate vehicle travel to differ from what we’ve seen in the past – which is something the establishment view struggles to incorporate.

Finally, we have what I call the “changing preferences” view. This perspective interprets the declining per capita demand for vehicle travel as a function of wider shifts in people’s underlying preferences. This view emphasises, for example, that young people are now placing a higher value on other forms of consumption, such as the connectivity offered by smart phones, than the personal mobility associated with owning and operating a vehicle – at least compared to their parents. The changing preferences view would seem to suggest the trends we’ve seen in the last 5-10 years are just the tip of the ice-berg, and that profound changes are just around the corner. Often people highlight that it’s not just technology which is driving these changes, but also awareness of the health and environmental effects of driving. Evidence for this view were recently summarised in this NZTA research report, which we previously discussed in this blog post.

The following figure is taken from this report.

Which view to believe? Well, personally I think all three have elements of truth to them. I think the establishment view is correct insofar as certain price and economic factors are likely to dominate changes in travel demands in the short term.

In the medium to long run, however, the other two views presented above seem to have more currency. I mean, if fewer people have drivers licenses then it seems plausible to suggest that there will be a reduction in per capital vehicle travel, ceteris paribus. Similarly, we can expect reductions in the cost of air travel to eat into the demand for long distance vehicle trips. In terms of preferences, these are critical to the accuracy of any model that seeks to forecast future demands based on past behaviours. If preferences changes, then our predictions are resting on a wobbly plank over shark-infested analytical waters.

So what’s the takeaway message? Well, I think it’s fair to say that we simply don’t know what to expect with regards to the future demand for vehicle travel.

In this context, I personally wouldn’t be investing in large transport projects, especially in rural areas, e.g. Puhoi-Wellsford, Waikato Expressway etc. As for the CRL, I think it’s likely to be a good project because of 1) patronage growth on the rail network, 2) Auckland’s growth as a whole, 3) the explosive growth in the city centre (both in terms of population and retail), and 4) wider trends in transport and land use policy, e.g. time-of-use road pricing and removing minimum parking requirements.

But I’m open to being convinced either way, and am interested to hear what others think on all this.

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