Economics of bike lanes

As an economist and keen utility cyclist (sorry, no lycra here) I have a close eye on the economic arguments surrounding urban transport investment.  The question I often ponder is whether investment in a cycling infrastructure network (on or off road) in Australian cities is justifiable on purely economic grounds.  To be specific, would the arguments used to justify road construction support more bike lane construction?

We already know that bike paths increase house prices.  But more seriously, are there objective economic grounds that suggest one set of road space is preferable to another on grounds of efficiency?

For the benevolent dictator, the crux of the question revolves around the tradeoff, or opportunity cost, of installing a bike lane.

Physical tradeoff

On-road lane space can have a cost close to zero where roads, for historical reasons, are sufficiently wide to allocated space to the lane.  Other times, a vehicle lane or parking capacity must be sacrificed.  But again, it one is considering costs, the lost opportunity for a bike lane should be factored into cost-benefit analysis of vehicle lanes.

This basic physical trade-off is obvious, and at least partly considered in most analysis. Another aspect to the physical trade-off, in the spirit of Ronald Coase, centers on efficiency and coordination.

bike lanes define property rights more clearly, and contribute to more coordinated and more peaceful shared use of a common-pool resource. For me that’s the primary economic reason to take the normative position in favor of bike lanes. More clearly defining property rights will reduce the costs associated with the decision to bicycle

It is the same basic economic rationale that supports defining vehicle lanes on road space. Although difficult to quantify, efficiency gains for total use of road space are important considerations.

Any keen cyclists should spare three minutes to watch this video, making the property rights argument in the most entertaining way.

Public funding tradeoff

Not only is the physical space a tradeoff, but funding for cycle lanes could easily be spent elsewhere in the public budget.  Admittedly, budget decisions do not prioritise on the basis of cost-benefit analysis, but are very political.  If one is to asses the opportunity cost of bike lane funding, it should be against other politically likely transport investments.

In addition, any cost savings made by delaying expansion of vehicle road space through modal shifts, should be considered.

Network effects

In exactly the same way road traffic forecasts assume that growing scale of the road network will ‘make room’ for vehicle transport demand, which is referred to as induced demand, growth of a bike lane network will induced cycling.

One would expect that network effects actually mean that there are increasing returns to bike lane investment.  The first bike lane, that has one origin and destination, will be of little value.  However, as an integrated network expands, it connects more trip origin and destination combinations at an exponential rate.

Network effects are extremely important when analyzing the success of pilot trials of bike lanes, which is the stage many Australian capital cities find themselves.  Any bike lane investment program needs consider whether network effects justify bringing forward investment to create a ‘critical’ mass in terms of the size of the network.

New York City found out just how strong the cycling uptake can be in reaction to improved infrastructure.  According to Felix Salmon the lesson of this chart, then, is that if you build bike lanes, cyclists will appear to fill them. (ht. AV)


The externalities associated with any urban transport development can be significant.  Although on massive problem is that the two most commonly reported externalities – of reduced health costs, and reduced greenhouse gas emissions – are in fact non existent.

One might at first assume that the individual health benefits from cycling, which genuinely exist (but are private benefits), would lead to reduced expenditure on public health.  However, the academic research on the matter suggests that net effects are much more subtle, and may in fact lead to more costly health care,

The reason is, that healthier people live longer. Over their lifetime healthier people usually incur more health costs because they simply have longer to do it.  And even healthy people have extensive health problems associated with ageing.  The net impact on health costs from having a healthier population depends on both the increase in the tax contribution from being more productive over possibly a longer period, and the increased heath costs from simply living longer (more particularly, being old longer).

Reducing greenhouse gas emissions is another argument often used in favour of bike lanes, and the increase in cycling, and decrease in motorized transport, they will encourage.   This is not true in an absolute sense, but in a geographic sense.  Urban air pollution will definitely decline if bike lanes create a modal shift in transport, but this this may simply result in increasing air pollution elsewhere when the cost savings of all the new cyclists is spent on other consumption (the rebound effect).

One study estimated the reduced greenhouse gas emissions from a car-free housing development in Vienna, but found that these car-free households had somewhat higher emissions in the categories air transport, nutrition, and ‘other’ consumption, reflecting the higher income per-capita. After all, you can’t spend all day at work producing goods, and not consume.  Even if you save, you are simply delaying consumption.

Given these considerations, it is completely uncertain whether net externalities in the form of health care cost reduction, and greenhouse gas emissions, are positive.

Overall, the economics of bike lanes is complex, which is in part due to the competition for urban road space, network effects, and externalities.  A proper analysis would require a lengthy report, but I hope this brief introduction provides a clue as to how subjective any analysis is likely to be, and how the decision may simply be a social choice.  My personal view is that investing in a low cost genuine urban transport option in the form of a bike lane network (on and off road), has overall economic and social benefits, compared to alternative urban transport investment.

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  1. Rumple,
    I would suggest that bike lanes are a perfect example of the stupidity of the obsessed. Well thought out planned bike lanes are an excelent enhancement to the social structor of a city. Eg the aproaches to pyrmont bridge in Sydney. But green-religious fundamentalism that a current local politician has aplied has stuffed an important economic hub with the instalation in Alexandrea industrial area. It has reduced the productivity (truck mobility and increased accedents)and is never used (I have seen 1 bike in 2 years of regular travel to the area). The build it and they will come mentality or we will force people to do the right thing religious zeal, as usual, just increases the tension in our lives for no benifit.

    Sensible support through observing and serving the public on the other hand… arr that would be too much to ask of Australian governments.

    • darklydrawlMEMBER

      I would agree that local councils painting a white line on a narrow road and calling it a bike lane (usually to pick up some money for meeting their green KPI’s) is pointless and stupid. Cyclists can’t use many of them anyway as the road edge is full of pothots and glass. Just makes things worse in some cases.

    • This is a good point, you can’t just assess the economics of cycling by seeing which is a more efficient mode of transport. You need to assess how each form of infrastructure affects the economy as a whole.

      If bike paths also hurt businesses, they can’t be a good idea.

  2. darklydrawlMEMBER

    Great stuff. I commute by (fast road cycle) 60 kms return most days (30 kms each way). I consider myself lucky I am able to do this. It is not an option for everyone, but honestly, it is so much better than driving on just about any metric you choose to measure it by. Oh, it takes about 1 hour each way. That is the question everyone asks me first 😉 The only factor that makes real difference is the wind.

    • I’m the same, and one other factor is that motorist hate cyclist’s generally. We need the 1 metre rule in Melboure, but I rode in NSW recently, they have the rule, and it didn’t seem to make a difference, and I found drivers more aggressive even it you are far left on the white line??

      • “motorist hate cyclist’s generally”

        I think its more like 0.5% hate and 99.5% indifferent, inattentive or unskilled.

        All road users need to do what aircraft pioneered decades ago. We need the equivalent of flight recorders. Its now cheap enough to have a closed loop recording of video, speed and position (gps) that is stored locally. In the avent of a collision, your Black box shakes hands with all others in the vicinity. What you did at the accident (and 5 min prior to) is now uncontestable

        Getting caught and punished is the best motivation for better road manners. So much of our blame settlement is skewed by having to rely on conflicting testimony or the expense of litigation.

        Why stick with that when the alternative costs peanuts?

        • I am currently 7 months into what will probably be a year long recovery from a shattered knee caused by a driver who failed to give way at an intersection.
          In preperation for my return to cycling I have bought a go pro helmet mounted camera.
          It will be interesting to be able to review moments from my cycle to work to see exactly what happened and to see if drivers are as bad as they seem at the time.

      • They loathe motorcyclists.

        I was abused at a set of stop lights yesterday because I filtered (lane split through stationary traffic) to the front on my BMW.

        I was shocked by the vitriole. I then laughed when I compared this attitude to that in Europe, where cars MOVE OUT OF THE WAY of filtering motorbikes and scooters and there’s more of a general acceptance of sharing the road.

        • Scariest ride I had was when a mate took me for a spin on his R1 in France. 190kmh+ on the motorway gunning through gaps between cars. I thought it was a suicide run at first, but all the cars were moving to the sides of their lanes to give him space. I’ve also experienced cycling in France and the drivers are aware of bikes, and patient, happy to wait for a safe opportunity to pass.

        • A few years ago the National Transport Commission tried to make lane-splitting illegal, but gave up on the idea because of opposition from motorcyclists.

          It surprises me that some people oppose lane-splitting – a practice that speeds up traffic without delaying any one individual – simply because it’s seen as ‘pushing in’

      • My 0.5% observation is based on 199 cars will just pass you and then along comes the person with “issues”.

        From the drivers perspective, most are already doing the right thing. But from the riders perspective, the same 0.5% on a busy road puts only 5 odd min between incidents.

        0.5% is what gives you the 20 cars parked by the side of the road after a booze bus has been there. You could do the public education thing so that the drivers that already mean you no harm move even further out of the way.

        But how are you going to reach the mind of the guy who realy did want to see you go arse over tit into the gutter?

        • Mining BoganMEMBER

          ‘But how are you going to reach the mind of the guy who realy did want to see you go arse over tit into the gutter?’

          Steel rod, sharpened to a point, inserted through the eye.

  3. John Forester, the author of the classic “Effective Cycling” (which has been through several editions since it came out in the 1970’s), is idolised by SERIOUS cyclists everywhere. He has a web site, and is still alive and cycling in his late 70’s.

    His argument has long been that it is unreasonable for cyclists to expect separate facilities, and that wide, safe, adequate-capacity roads represent a win-win situation for everyone. Cyclists, he argues, should be devoting any political efforts they make, to supporting the cause of roads and motorists against the public transport lobby that diverts so many funds away from roads, with bad consequences for cyclists safety and convenience as well as automobile congestion.

    • darklydrawlMEMBER

      Good Point. I think it is important to consider that people often treat “cyclists” as a single user group. However there is a huge difference between the needs of an experienced and skilled road cyclist, a kid on a bike with his mum and someone riding to the shop to get milk.

      Hell, even I have different needs. As a road cyclist I never ride in the shared bike lanes and always on the road. In peak hour traffic my speed is usually faster than the cars anyway. Shared cycle paths as they are too dangerous and meandering for serious cycling.

      On the other hand, when I am out with my 4 yo, I always ride on the footpaths and/or off road cycle tracks. Both are important as they serve complete different cycle users.

      There is also usually a huge difference in skill, attitude and road safety behaviour between an experienced cyclist and a ‘dude on a bike’. A fact ofen overlooked by people.

      But this is a bit OT. Rumple has a good point. Is the money being spend effectively?

  4. What about the feel good side of it. Apparently exercise releases some ‘feel good’ chemicals in our bodies. And honestly when I arrive to work on a bicycle I feel the difference compared to when driving. Maybe this then goes on to better productivity.

  5. BTW the other week Cadel Evans said Brisbane drivers were very inconsiderate of cyclists. Did someone actually have a go at Cadel? Come on Brisbane, get your act together 🙂

  6. I’m a utility cyclist too (or I was until fatherhood forced me into a car), and my cycling experiences are mostly limited to parts of Sydney with very few bicycle lanes.

    I soon learned that there a few drivers that are quite aggressive, and a lot more than are just plain stupid or unaware, so I stopped riding on busy roads. I took back streets whenever possible, and rode on the pavement when necessary. I was courteous with pedestrians, and dismounted if it was crowded.

    By selectively ignoring the rule about no bikes on footpaths, I was able to get around fine without bike paths.

    This suggests that we could go a long way to improving the “bikeability” of our cities without spending a cent, just by relaxing the rules about footpath use. In areas with high pedestrian traffic it is probably wise to ask cyclist to dismount, but our cities have miles and miles of footpaths that are barely used, particularly along busy roads that don’t have many shops.

    Another cheap way of improving bikeabiltiy would be to use “two-way, single lanes” in quiet surburban back streets, as they do in Japan. That is, the cars are wide enough for two cars to pass, but rather than having a dividing line down the middle of the road they have pedestrian/bike lanes on each side of the road. Cars drive down the middle of the road, unless they meet another car coming the other way, in which case they move into the pedestrian/bike lanes (assuming there are no pedestrians or cyclists in them, which is true most of the time).

    The Japanese are forced into this solution because of their historically narrow streets, and I think the situation is similar in many parts of Europe. But in Australia a lot of suburban streets effectively become single lane anyway when there are a lot of cars parked on each side of the street, and so drivers are already used to giving way to one another like this.

    Of course, in a lot of cases it will not be possible to fit two bike lanes and still allow cars to park on the side of the road. In most parts of Japan, cars are not allowed to park on the side of the road at all – everyone has to park in a car park. This is a right pain (and expensive) when you are trying to find a park, but it enables road space to be used efficiently for – shock, horror – transport.

    (Ultimately this is a political question – do we want to give away free services to stationary vehicles or to moving bikes? At the moment motorists probably have the upper hand, but given current trends that may change before too long.)

    Still I’m confident that there are enough back streets where this would work, so that the combining the two approaches above would dramatically expand network of bikeable streets, generating the kind of network effects that RS refers to.

    • My main point, which may have got lost in all the details, is that there are ways of improving bikeability without detracting too much from pedestrians or motorists.

      Rather than having a blanket rule forcing cyclists to share the road with motorists, we should have intelligient, case-by-case rules that allow cyclists to share footpaths with pedestrians (when appropriate).

      This already happens to a certain extent — it should be expanded significantly to existing footpaths.

    • I’m pretty certain that there’s no better way to destroy public sentiment of cyclists than to allow them to ride on the footpath.

      As with most things a few bad apples spoil it for everyone, in cycling’s case its courier riders. I deplore the idea of bicycle registration – except for these guys.

      • In QLD, cyclist are allowed to ride on any footpath unless it is a designated pedestrian only path. Such designations are only common in the CBD.

        That’s another problem. No one even really knows the current rules.

        • darklydrawlMEMBER

          A big problem is the rules vary widely from state to state regarding cyclists.

          What is legal in one state is not legal in another.

          Mind you there are similar issues for motorists as well – you really would think it could be standard for all.

          In general there seems to be a certain percent of the population that have no idea that cyclists are legally allowed on the road and that (in Victoria at least) cycling on the footpath (unless with a child) is illegal.

          I follow the road rules tightly whilst on the bike, however safety (mine and others around me) will always come first. And what is safest at any given moment depends entirely on the situation at hand. It varies from moment to moment.

      • I agree.

        I used to be an avid cyclist myself, but for all the inconsdierate drivers out there, there are an equal number of boorish cyclist.

        Get a large number of them, and they strive for hegemonic control of whatever road they are taking.

      • Allowing cyclists on footpaths would not work in every case, but there are a lot of cases where it would work.

        In places like the CBD, where you’re most likely to be run over by couriers, it would make more sense to have dedicated (or at least designated) bike routes.

        Initially, pedestrians probably would be a bit disgruntled about having to share with cyclists, but I think most casual cyclists would have the decency to slow down to pedestrian pace when necessary, or to make a brief detour off the pavement and onto the road when safe to do so. That’s how it works in Japan, anyway, and everyone is OK with it because almost every rides a bike. Of course, Japanese people tend to be quite courteous to start with, which probably helps.

        I sometimes get the feeling that the cycling lobby has been captured by people who like to wear lycra and ride really fast, and who want raise bikes to the same status as cars. Personally, I think a more flexible approach can be more effective when it comes to making cycling a viable option for the bulk of the population.

        As for people not knowing the rules, I imagine it would be a lot cheaper to paint signs on the footpath indicating where bikes are and aren’t allowed than it would be to build new bike paths.

    • Also… in most suburban streets in Australia there are footpaths on both sides of the road. Only one side would need to be turned into a shared pathway — pedestrians who really don’t want to have to deal with cyclists coming up behind them can walk on the other side of the street. On the side of the street that becomes a shared pathway in many cases it will be possible to widen the pathway by sacrificing some of the nature strip, making it easier for pedestrians and cyclists to avoid one another.

      And… there is no need to make all streets have shared pathways. There just has to be enough safe routes that people can get from one part of a city to another while spending at least 90% of the journey on safe routes.

    • Hi johnyaku
      I noticed you said ‘I was a utility cyclist too (or I was until fatherhood forced me into a car)’.
      Time to get a Surly Big Dummy! or attach an Xtracycle to the back of your bike. Its a long tail cargo bike, which feels almost like a normal bike but is like having a trailer permanently attached.

      There are specially designed kids seats that attach to the back so if your kids are 2+ years old its time to get back on the bike! And I can easily haul my girlfriend around (although granted I do have an electric motor…)

  7. As a cyclist (injured and off the road for the moment) I am generally in favour of better cycling infrastructure, particularly over here in the West. However, I would think that it is better to be hesitant in utilising the network affect from New York with an Australian city. Correct me if I am wrong, but I would think that the population density is substantially higher in NYC than in any Australian city, therefore resulting in a much larger population to capitalise on the integrated cycle network. Consequently, wouldn’t the network affect be less dramatic than in New York?

  8. The biggest waste is the city cycle program in brisbane I mean does anyone use it? They removed fully utilised motorcycle parking on charlotte st to replace it with this white elephant, fair dinkum the lycra clad really are the golden haired boys of local government policy.

    • Now that they’ve got stations in Toowong and St Lucia, I bought a card and I do use it. Ray Smith won’t win any votes from the younger generation campaigning against it. Utility cyclists != lycra clad and I can’t wait for the Bicentennial Bikeway repairs to be finished (I keep thinking how much faster the Chinese could do it :)).