Transportation innovations and investments have contributed significantly to U.S. economic growth. They have enabled households to optimize their residential and workplace locations and their choice of employers; encouraged firms to increase the size and scope of their markets, reduce their inventories, and expand their choice of workers; and allowed consumers to benefit from greater competition among domestic and international firms and from more product variety. The motor vehicle, which has contributed greatly to those socially desirable activities, has been listed among the greatest human inventions of all time (Bowler 2017; Winston 2010).

The increasing dominance of cars and trucks for...

The Society of Automotive Engineers has created a widely accepted scale of vehicle autonomy, which ranges from level 0 (no autonomy) to level 5 (cars that do not need a steering wheel or pedals because they can perform the entire trip without human input). Motorists have already grown accustomed to some level of independence from their cars. Many vehicles, for instance, have collision-avoidance systems or self-parking features that place them at a level 1 on the scale.

To take just one example, the 2018 Mercedes-Benz S-Class advertises its vehicles as having a suite of safety and driver-assistive technologies, including a...

Traditional automobiles produced enormous benefits to the United States when they were introduced in the early 1900s. They improved travelers’ accessibility for existing trips, which had been taken by horse or railroad, and facilitated new trips. Automobiles also dramatically changed land use because people could live in roomier and less expensive houses on larger lots, at some distance from their workplaces. While automobiles displaced some existing jobs and reduced the use of other modes of transportation, they also created new jobs, especially in car production and servicing and in building and maintaining the U.S. road system. However, as the country...

Only fragmentary evidence exists of the effects of congestion on an economy. For example, Hymel (2009), Sweet (2014), and Angel and Blei (2015) find that highway congestion is associated with slower job growth in U.S. metropolitan areas, while Light (2007) uses the Bureau of Labor Statistics’ American Time-Use Survey to estimate reductions in workers’ productivity and income that are caused by traffic delays from highway congestion. This chapter provides a more comprehensive empirical picture of the effects of highway congestion on the U.S. economy as a basis for estimating the potential benefits from autonomous vehicles’ effect on congestion.

This picture...

Three important considerations affect how we specify the effect of self-help taxes on congestion in the first-stage estimation. First, it may take considerable time for a county’s self-help tax to raise the funds necessary to complete a project, especially because political compromises among competing interests and across geographical areas make it highly unlikely at any given time that the optimal level of funds has been raised and allocated to roads. Second, before they can begin actual roadwork, self-help counties must perform engineering analyses and obtain permits indicating that they have satisfied National Environment and Policy Act and California Environmental Quality...

Autonomous vehicles represent a positive exogenous technological shock that has the potential to significantly reduce congestion and delays by improving traffic flows and reducing accidents. Reductions in delays could have direct positive effects on the growth rates of economic-performance measures.

Fagnant and Kockelman (2015) provides figures that we use to make a base-case assumption of the effect of autonomous vehicles on congestion. The authors report that at a 50 percent penetration (meaning that 50 percent of the vehicles on the road are autonomous), autonomous vehicles would cause a 35 percent reduction in freeway delays, accounting for the offsetting effect of...

The technological benefit of autonomous vehicles is that they have the potential to reduce some of the adverse effects of cars and trucks—we have shown the potentially huge benefits from their effects on reducing congestion—and to increase those modes’ positive effects. In this chapter, we discuss the effect of autonomous vehicles on improving traffic safety, health, accessibility, land use, employment, the efficiency of the U.S. transportation system, and public finance. When we summarize all the potential benefits of autonomous vehicles in the conclusion, the importance of our central thesis becomes crystal clear: policymakers must take effective actions to...

Policymakers and the public must be convinced that autonomous vehicles are safe; otherwise, their adoption will be severely limited or postponed indefinitely. The new technology has its critics. Kalra and Paddock (2016) argues that autonomous vehicles would have to travel hundreds of millions (possibly hundreds of billions) of miles before their reliability and safety could be fully determined. But the study assumes that autonomous-vehicle software and technology are static and ignores suppliers’ steep learning curve, where, as exemplified by Waymo’s simulation of challenging driving situations, driving mistakes can be quickly identified and corrected, and vehicles can learn from other vehicles’...

Policymakers will have considerable time to prepare the country—specifically, the highway infrastructure—for successful adoption of autonomous vehicles. However, early indications are that they are not fully committed to making progress to implement new policies and to reform existing ones, which could cause the adoption of autonomous vehicles to be delayed and their performance to be significantly compromised when they are adopted.

Policymakers must take four crucial steps to ensure safe and timely introduction:

establish a framework for testing autonomous vehicles nationwide and set the standards that providers must meet to sell their vehicles to the public

develop protocols...

The autonomous vehicle is a life-altering innovation that has the attractive feature of both increasing consumption, by improving the nation’s GDP growth, employment, and labor earnings, and saving lives (Jones 2016). The successful adoption of autonomous vehicles would be a potential cure for sluggish economic growth and would counter the pessimistic view that the lack of innovation in the future may prevent living standards from improving (Gordon 2016). The World Economic Forum and Intel peg autonomous vehicles’ eventual annual social benefits at several trillion dollars (Schwartz 2018). Our estimate of the annual benefits from reducing congestion—combined with plausible estimates...