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I'm willing to believe that, but it always sounds like nonsense to me. Normally, I hear people use it to describe the basic economics of a demand already great

I'm willing to believe that, but it always sounds like nonsense to me. Normally, I hear people use it to describe the basic economics of a demand already greatly in excess of supply. If there's not enough food to go around, providing a little more food just means people will eat that additional food and they will still be hungry. We don't conclude that induced hunger is a thing. Going back to traffic as the example, if I want to drive downtown to see a ballet but decide against it because traffic is bad, then they add more lanes and next year I do decide to drive to see that ballet, then I'm creating more traffic because they added more lanes. That demand wasn't induced -- it just transitioned from unmet demand to met demand. If induced demand isn't nonsense, then I must be oversimplifying it. What am I missing?

triceratops 7y ago
> We don't conclude that induced hunger is a thing. Certain foods are more expensive than others. That's why we don't eat steak and lobster for every meal. But if the price of those foods went down, you can bet there would be a lot more demand. That's induced demand. Everyone was already getting enough calories and nutrients, but making something desirable a lot cheaper had the effect of more people trying to buy it.
- dragonwriter 7y ago
  > But if the price of those foods went down, you can bet there would be a lot more demand. No, you can bet there'd be a greater market-clearing quantity. Greater demand would mean people were willing to buy more at thesame price. If anything, over time, lower prices should reduce demand by setting s lower expectation of the “right” price and reducing the quantity people are willing to buy at higher prices. Demand is the function mapping price to quantity people are willing to buy.
  - timerol 7y ago
    Yep. And the government fixes the price of using a road at $0, causing the induced demand issue. A limiting factor of supply (how many cars are currently using the road) is completely ignored when setting the price. The cost of constructing roads is handled by other taxes, but that doesn't change that the roads themselves need to be priced higher to not have shortages.
    - dragonwriter 7y ago
      > And the government fixes the price of using a road at $0, That's arguably true of electric vehicles, but ICE engines pay road user fees by way of gas taxes, which are nonzero and related (imperfectly, sure) to road impact. > causing the induced demand issue. I think induced demand is not really a road price issue: more road access -> more desirability to attractive businesses -> more demand (at the same price) for road use. Now, if you charged higher road prices instead of building more roads, to reduce traffic, you'd avoid induced demand by avoiding attracting business and raise revenue, it's true, but the induced demand isn't a product of $0 road cost (which isn't a thing, mostly) but of increased ease of access from the short-term effect of more roads.
      - triceratops 7y ago
        I wasn't arguing that induced demand is a product of $0 road cost. It's a product of lower time cost - new roads decrease congestion (temporarily) and induce the higher demand. Eventually the new roads are as congested as the old ones.

triceratops 7y ago

> We don't conclude that induced hunger is a thing. Certain foods are more expensive than others. That's why we don't eat steak and lobster for every meal. But if the price of those foods went down, you can bet there would be a lot more demand. That's induced demand. Everyone was already getting enough calories and nutrients, but making something desirable a lot cheaper had the effect of more people trying to buy it.

dragonwriter 7y ago
> But if the price of those foods went down, you can bet there would be a lot more demand. No, you can bet there'd be a greater market-clearing quantity. Greater demand would mean people were willing to buy more at thesame price. If anything, over time, lower prices should reduce demand by setting s lower expectation of the “right” price and reducing the quantity people are willing to buy at higher prices. Demand is the function mapping price to quantity people are willing to buy.
- timerol 7y ago
  Yep. And the government fixes the price of using a road at $0, causing the induced demand issue. A limiting factor of supply (how many cars are currently using the road) is completely ignored when setting the price. The cost of constructing roads is handled by other taxes, but that doesn't change that the roads themselves need to be priced higher to not have shortages.
  - dragonwriter 7y ago
    > And the government fixes the price of using a road at $0, That's arguably true of electric vehicles, but ICE engines pay road user fees by way of gas taxes, which are nonzero and related (imperfectly, sure) to road impact. > causing the induced demand issue. I think induced demand is not really a road price issue: more road access -> more desirability to attractive businesses -> more demand (at the same price) for road use. Now, if you charged higher road prices instead of building more roads, to reduce traffic, you'd avoid induced demand by avoiding attracting business and raise revenue, it's true, but the induced demand isn't a product of $0 road cost (which isn't a thing, mostly) but of increased ease of access from the short-term effect of more roads.
    - triceratops 7y ago
      I wasn't arguing that induced demand is a product of $0 road cost. It's a product of lower time cost - new roads decrease congestion (temporarily) and induce the higher demand. Eventually the new roads are as congested as the old ones.