A lesson in the elasticity of demand, prices and urban congestion. It looks like Uber, Lyft and other ride sharing services are swamping the capacity of New York City streets

Every day, we’re being told, we’re on the verge of a technological revolution that will remedy our persistent urban transportation problems. Smart cities, replete with sensors, command centers, and linked to an Internet of Things, will move us every more quickly and effortlessly to our destinations, traffic lights and even traffic will become a thing of the past. The most fully deployed harbinger of the change that such technology has wrought is clearly the app-based ride-hailing services, including Uber, Lyft and others. A few weeks back, we took to task claims from one study that a couple thousand autonomously piloted 10-passenger vans could virtually eliminate traffic congestion in Manhattan.

A new report from New York should give the techno-optimists reason to pause. Transportation consultant Bruce Schaller, who previously served as New York City’s deputy transportation commissioner, has sifted through the detailed records of New York City’s Taxi Licensing Commission and painted a stark picture of growing traffic congestion in the city–thanks to to increasing proliferation of app-based ride hailing services, which the report refers to as transportation network companies (TNCs). Schaller has a shorter op-ed summarizing his report in the New York Daily News, but you’ll want to have a look at the entire 38-page report, entitled “UNSUSTAINABLE? The Growth of App-Based Ride Services and Traffic, Travel and the Future of New York City,” The full report is worth a read, but here are some highlights.

• The total number of miles driven in New York City by TNCs vehicles has increased by 600 million miles in the past three years.
• Trips taken by the combination of taxis and TNCs has outpaced the increase in trips taken by transit; for the precdeing 24 years (since 1990) growth in person trips has been led by increased transit ridership.
• The additional vehicle traffic associated with TNCs amounts to about a 7 percent increase in traffic levels in Manhattan, about the same amount of traffic that the city’s cordon-pricing proposal was supposed to reduce.
• The bulk of the increase in traffic associated with TNCs has been in the morning and evening peak hours.
• While TNCs initially grew mostly by taking traffic from yellow cabs, increasingly they are taking riders from transit, and in some cases stimulating additional travel.

Bottom line: the growth of TNCs is increasing the volume of vehicles on New York City streets, and adding to congestion and delays. Interestingly, this key finding is a turnaround for Schaller, who acknowledges that just a year ago (in January 2016), he was part of a team that concluded on behalf of Mayor de Blasio that the added traffic from ride hailing services wasn’t increasing the city’s congestion. The growth in TNC volumes over the past year has apparently changed his mind.

What’s changed? In short, the price of car travel has fallen in New York City, relative to the alternatives. Previously, a combination of high taxi fares and limited entry (a fixed number of medallions) coupled with prohibitively expensive parking rates in most of Manhattan, meant that taking a private car cost four or five times more times as much as the average transit fare. But with Uber and Lyft charging much lower rates, and flooding the market with additional vehicles, there’s been a noticeable uptick in traffic volumes. This is a fundamental lesson in economics: increasing the supply of vehicles and lowering prices is going to trigger additional demand. And in the face of limited street capacity, congestion is likely to increase. And we should keep in mind that the TNCs are just a dress rehearsal for fleets of autonomous vehicles. Subtract the cost of paying drivers, and they promise to be even cheaper and more plentiful than Uber and Lyft are today, especially in high density urban markets.

Ultimately, the solution to this problem will come from correctly pricing the use of the city’s scarce and valuable street space, particularly at rush hour. Schaller makes this very clear:

As they steadily cut fares, TNCs are erasing these longstanding financial disincentives for traveling by motor vehicle in Manhattan. If TNC growth continues at the current pace (and there is no sign of it leveling off), the necessity of some type of road pricing will become more and more evident.

The detailed data from Uber and Lyft however, point up the major limitations of the proposed cordon-pricing scheme that was suggested for New York City a decade ago (under cordon pricing, vehicles entering lower Manhattan, below 96th or 110th street, or crossing the Hudson or the East River would pay a daily toll). But because so much traffic and so many rides begin and end within those boundaries, the cordon pricing scheme does nothing to disincentivize travel in the center, once the vehicle has paid the toll.

Consequently, if pricing is going to work in Manhattan, it will probably have to be some kind of zoned, time-of-day pricing, charging higher rates for travel in and through Manhattan during peak hours, which much lower fees for travel in out-lying boroughs and at off-peak hours. In effect, Uber’s much maligned “surge” pricing is proof of concept for this model; it just has to have prices reflect the scarcity and value of the publicly owned roadway rather than just the momentary scarcity of Uber’s privately owned vehicles.  The GPS and mobile Internet technology that’s now been proven in taxis and TNC vehicles, shows a such a system is technically quite feasible.

Without some form of road pricing, the high concentration of profitable fares in denser neighborhoods and at peak hours, coupled with the additional financial inducement of surge pricing bonuses could lead ever greater volumes of TNC vehicles to clog city streets. As New York transportation expert Charles Komanoff puts it, the Schaller report settles the question that TNCs are making the city’s gridlock worst. He effectively calls the report a must read:

It touches on virtually every consequential transportation trend and policy question facing the five boroughs and stands as the most thoughtful and thorough analysis of New York City traffic and transportation issues since the Bloomberg years.

But New York is just on the leading edge of a range of technological and policy issues that every city is going to have to confront in the years ahead.  If you want to get ahead of the curve–and think about where the expansion of TNCs, and ultimately autonomous vehicles is taking us–here is a good place to start.