Traffic jams: An economic perspective

You know the feeling.

The skies are grey, and fat drops of rain batter your windscreen: it’s almost as if the sky’s crying for you. You’re stuck in a sandwich of motorised vehicles – progress only comes a few inches at a time, slowly but not always surely. You curse as the faint hope you had of speeding ahead is dashed, falling away like droplets from the sky.

But then, after long hours of waiting, it happens. One car edges ahead, then another, then another. Finally, it’s your turn; your car moves forward, breaking the seemingly endless deadlock. It’s emotional catharsis the likes of which you can only experience after hours of frustration. Finally, you’re home, free from the scourge of traffic (until next morning, at least).

When the adrenaline rush wears off, though, you realise that you just wasted precious hours of your life that you’ll never get back. You could have spent that time watching television, playing chess, or even working more if you had to. In addition to the emotional outrage faced by many drivers across the planet, this congestion also has severe economic consequences for car-owning households. According to The Economist, traffic jams cost Los Angeles $23 billion a year, and that isn’t even when we take into account environmental impact. But why exactly do traffic jams happen, and what exactly can we do about them?

Well, part of the blame for traffic jams lies squarely on the shoulders of the people themselves. Public transport in the form of predominantly buses is a “key mode of public transport for those on low incomes”, according to Transport for London. As incomes go up, naturally the proportion of people using public transport in a particular country will decline. Don’t believe me? Hear me out. Public transport is an inferior service, which essentially means that demand for it decreases as consumer incomes go up. This is natural, as cars are inherently more prestigious than buses or trains; they grant you a degree of privacy and exclusivity, and they almost always look better. Therefore, you’d expect that as people become more affluent, more of them will ride in cars and other private forms of transport. Still don’t believe me? Look at the UK. According to the BBC, the number of cars on the streets of Britain rose by almost 600,000 in one year, with the average weekly wages in the United Kingdom also steadily rising. In this case, the correlation implies a heavy degree of causation. What can be done about this? In truth, not much; people’s opinions are not going to radically change. We could, however, simultaneously create more low-skilled jobs in the cleaning sector and clean up our public transport, which appears to be surprisingly dirty. Cleaning up and renovating some of our aged public transport, thereby making it somewhat more prestigious, could go some way to dampening the tradeoff between consumer income and public transport use, although, admittedly, the effect probably won’t be too drastic. It would help though, so why not try it?

Improving the quality of public transport could diminish the correlation between income and car use. PHOTO CREDITS: Route 79

It’s also important to consider that as of right now, roads are mostly free at the point of use across the world. Therefore, many people see the use of roads as a given: something for which there is no cost. Hence, the number of cars on the road are surging, as the only thing people actually have to pay for is the payments associated with the car itself and fuel. If governments around the world could somehow introduce a system whereby people are charged for the duration of time that they spend on the roads, demand for cars would fall due to increased price leading to a decrease in quantity demanded, as per the demand curve. This is because an increase in the cost of driving means that for more and more people, the marginal utility gained by using a car is offset by its substantial total cost (in layman’s terms, it costs more than it’s worth). Although this would lead to potential job losses in the auto manufacturing industry, it is necessary to carry out to offset both the economic loss of productivity and the severe environmental damage on air quality caused by traffic jams. In short, while painful for one industry, we need to do this for the greater economic and environmental good.

While campaigns encouraging walking, cycling and use of public transport are almost ubiquitous in today’s world, and have no doubt had their effects, more still needs to be done in order for the prevalence of cars on the roads to decrease dramatically. The difficulty of cycling is one factor why for many, the utility gained in terms of exercise and fitness is less than the cost, in terms of their commute becoming drastically longer and also the safety risk that it entails. What I am proposing to solve this is to build more cycle lanes next to roads, thereby increasing their supply. The increased ease by which many can now find an easy way to cycle to the workplace would decrease the costs of cycling, thereby making the utility/cost tradeoff more favourable, hence spurring demand for bicycles with which to cycle to work, potentially helping the cycling industry also. Given that these cycle lanes take up considerably less space than new roads would, they are both a quicker and more effective solution to the problem of traffic congestion (the increased supply of roads would simply spur demand for cars in the same way as demand for bicycles is spurred above).

Applying economics to the problem of traffic congestion may seem unorthodox at first, but I am convinced that inherently, many of the world’s problems are economic. After applying economics to this situation, it’s entirely possible that you may just spend less time stuck on the roads.

Agree? Disagree? Please leave a comment below, whether you’ve been attracted or repulsed by my ideas.


By Shrey Srivastava

A finance and economics enthusiast, and someone who wants to share his views with the world.


  1. Hi Shrey,

    Thanks for posting! I think this is very well done. Aren’t Srivastava traditionally scribes? Living up to the family name.

    I enjoyed the intro, but would have some summary right after it. The reader could think it is just about public transportation, and then you go into paid roads.

    You might want to discuss what other places are doing and how it might work. Delhi’s odd/even pilot, Singapore’s expensive registration fees, outright bans (Oslo is discussing), etc… Gives some global perspective and maybe even more readers.

    Then, do speak to your audience. This is a political group — even if, say, odd/even is a great idea does it conflict with the freedom/libertarian spirit of the US?

    Great job man! Better than me at 16, that’s for sure.

    Liked by 1 person

    1. Thanks for the comment Mr. Peck! I really appreciate it. I will definitely take your suggestions into account next time; they’ve taught me a lot! Have a great day and thanks again for the comment 🙂


  2. We are on the same eco-political page, as 64 is a fractal of 16. I might add that also important to the positive correlation between household income and use of private transportation is our cultural love affair with freedom of autonomy, our belief that if we can afford to go where we want whenever we want, then it is our right to do so. What do you think? Gerald Dillenbeck


  3. Traffic is actually solved by engineers. It is a physics problem. It is quite cool actually. The wave of traffic patterns.


  4. Very interesting perspective Shrey. 👌🏼👏🏼 though implementing the suggestion of people paying for the time spent on the road would be difficult. Greater reliance on public transport is indeed the key to reducing traffic on the roads. The tube network in London does a great job. In my opinion more and more areas in the city could be designated as traffic free like in Norway and cycling would seem more attractive and less risky if the roads are free from heavy traffic. Cities like Copenhegen, Amsterdam are live examples. Sharing your article.


    1. Thank you so much! Yes, you’re absolutely right, although a similar system to the one I suggested has been implemented in Singapore, with great success, hence why I thought it was feasible. Thanks again for the comment! 🙂


  5. This is a good start to the problem, but I do see a potential pitfall. Consider a simple example. You have a 15 minute commute, 10 minutes of driving, and 5 minutes waiting in traffic. Now, let’s say we have a bus, with the same 10 minute driving time, but it has to stop to let people on and off at different places, and let’s say that takes 2 minutes per stop, with 3 stops. Now, if everyone stopped using cars and switch to the bus, and we alleviated the traffic jam, the commute to work would take 16 minutes. In this example, the commuter would have actually preferred to wait in the traffic jam. This is obviously oversimplified, but if we value the welfare loss of traffic as time, we must also consider the potential time loss of the alternatives.

    Though if you consider environmental impact, the buses will win every time. Overall a good set of considerations to the problem though.


    1. Thanks for the comment! I agree in that we should “consider the potential time loss of the alternatives.” Most people see traffic jams as a nuisance and a waste of time though, so if we can just exploit these feelings, we may have a solution.


  6. Hi Shrey!

    Great post! I might add that you have the passion and potential to become a great economist.

    I have to agree with Corey, that traffic is a problem of science. It involves a complex algorithm so an input (in this case, cars) can present the desired output (the flow of traffic). While it is a good idea to use traditonal means like riding bicycles to solve the problem, it is important to note that the demand for cars always keep on increasing as people get wealthier, unless in the future there is a medical study saying cars can shorten a person’s lifetime say maybe 10 years.

    Economics has its science too, and maybe in the future we economists can come up with a math to solve traffic congestion. Let’s hope for that breakthrough.


  7. Very interesting! Creating jobs to clean up public transportation to make it more attractive (increasing demand for it, and hence reducing demand for using automobiles) sounds like a great plan. It comes with two benefits: increasing demand for something better and raising employment! Awesome! The main difficulty would be though that paying for those jobs will not be easy unless public transportation gains substantial profit as a result of their newly polished transportation system. Therefore, I think it would be critical making sure that the demand for public transportation indeed will go up with those additional jobs created- such as confirming that some people who would otherwise use public transportation don’t because they think it is dirty right now – and, if not, we many need to implement other measures that are near proven methods to increasing demand for public transportation(if public opinions can’t be persuaded to change attitudes, maybe try other approaches like encouraging companies to offer various forms of carpools?) that do not require too much investment.


  8. In my opinion, Traffic jams are the result of the disconnect between the private and public sector. The private sector pushes for more car ownership while the public sector only reacts to public demand via an inefficient and politically biased process leading to road building etc.. Once traffic jams get bad enough that it stalls private car ownership and affects other parts of private industry, interest groups will push government to take measures to alleviate the issue. I don’t see much wrong with road ownership. As far as I know, some countries do have private toll roads and I think they work well as far as traffic goes etc..


    1. Hi! actually, anything that involves resource allocation issues is an economic issue. In this case, Shrey started to talk about how one could’ve happily allocated his time playing chess, watching tv or working more instead of staying stuck in traffic.


  9. I agree with your points, Shrey. And I know that blogspace is limited, but the people’s preference to private over public transportation is a tricky business. Even in the same city, the latter’s quality changes depending upon the neighborhood (posh neighborhoods, touristic neighborhoods, “kinky” neighborhoods, etc…), the ruling poitical party, the season of the year, the existence of a very good and almost-identical substitute (like carpooling systems, taxi, uber, etc…) and perhaps even the climate.

    Traffic jams could be considered an economic problem. But it is also an engineering, political, cultural and who knows, maybe historical dilemma. I think it would be good to pool our ideas together and solve this thing once and for all!

    Lastly, and I might be branded here as too government-dependent but, governments COULD do things if they wanted to. They could start by educating, followed by some or all of your suggestions as well as stuff from Rob Peck’s comment above. You know what they say: if there’s a will, there’s a way!


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