Commentary
Recently, I was involved in a debate about the potential effectiveness of building a new tunnel in solving traffic congestion problems. Although it is about Hong Kong—a very small city, the economics behind is somehow worth discussing. The origin of the debate is as follows. Intuitively a new tunnel means more supply which is supposed to reduce congestion. However, opponents raise the counterargument that “supply creates demand” or induces demand, which would make things worse. This is formalized as the Fundamental Law of Road Congestion.
