Induced demand with regard to road transportation is the increased traffic that results from increased capacity.
Such increased capacity is typically constructed with the stated intention of reducing congestion and increasing travel speeds. It can be attained through the upgrading of existing roads (including by adding lanes, replacing intersections with overpasses and underpasses, and improving traffic signals) and by the construction of completely new roads (including freeways and expressways). It can also be facilitated or attained in some cases through the expansion of parking capacity.
The increased capacity does, at least initially, almost always result in reduced congestion and higher speeds. However, with the passage of time, traffic increases as the reduced congestion and higher speeds induce more drivers to make trips they would otherwise not make or to shift from other routes or modes. Such increased traffic will eventually offset, often completely, the initially reduced congestion and greater speeds.
This phenomenon contradicts the belief still espoused by many transportation planners, politicians and others that expanding capacity is an effective solution for congestion. Some transportation planners, while acknowledging that induced demand exists, contend that it should not be a reason to discontinue expanding road capacity. They insist that greater capacity is still desirable even if congestion is not reduced because it benefits people by allowing more trips to be made. The flaw in this argument is the failure to fully consider the truly massive costs of ever-expanding capacity as well as to consider the costs and benefits of the alternatives, including the provision of alternative transportation.
One form of costs is the monetary expenditures, which reduce funds available for other uses, including healthcare, education, housing, environmental protection, alternative transportation, and the maintenance and repair of existing roads.
Another is externalities. They can include increased air pollution, increased noise pollution, more traffic accidents, and greater inconvenience for pedestrians (for example because wider streets can be more difficult to cross). Another type of externality can be higher costs for new commercial and residential construction because of the need to add more surface or multi-level parking space to accommodate the increased traffic. These externalities can reduce the quality of life in central urban areas and thus promote the creation of more sprawl.
Also to be considered, but usually is not, is the fact that expanded capacity in the form of new and wider roads will eventually result in additional maintenance costs as the roads wear out and require structural repairs (including fixing potholes and repairing bridges) and repaving. Many local, regional and other governments around the world have been falling further and further behind on maintaining their existing roads. It could be argued that maintaining them should be a higher priority for their limited road transportation funds, especially because roads can become more dangerous as their condition deteriorates and because the longer maintenance and repair is delayed the more costly it becomes.
Externalities are also frequently generated beyond the roads for which capacity is increased. That is, they can extend to connecting roads, parking lots, etc. which will receive more traffic as a result of the increased traffic from the upgraded or new roads.
Still another type of cost is the considerable disruption that often occurs to existing capacity and traffic while the construction is under way. For example, some lanes of an existing road often need to be closed when adjacent lanes are being added or while an overpass is being widened.