Change my mind: Density increases local but decreases global prices

Well, partially because induced demand is a little bit of a meme, and partially because it's actually different.

See, if you have a city that's dense enough that transit actually represents a high share of trips, it's possible that increasing road capacity will cause people to switch from transit to driving, which is essentially a wash for economic activity, and quickly replenishes congestion. In these very dense areas it's more appropriate to build infrastructure for other modes of transportation — just as it makes more sense to build apartments instead of houses.

But if you have a city where trips are already almost always by car, then any induced demand actually represents a new trip that wasn't taken before. This must be distinguished from the true Braess paradox [1], which is rare. More trips usually mean that you actually improved people's lives, which is a good thing.

The thing is that some modern urbanist activists just absolutely hate cars, so they exaggerate the case against roads. There are still other reasons to avoid expanding the road network: it costs money, it creates pollution, it causes crash risks, it drives sprawl and balkanization, and it contributes to impermeable ground cover and urban heat islands. Parking lots do all of this and make life more difficult for people who are walking. But the notion among some urbanists that building roads does absolutely no good is simply wrong. The literature on the economic benefits of road construction is extensive.

I think that people who study the issue are leery of alienating their already tiny support base by gainsaying them about this, though. I personally like to point out that replacing intersections with roundabouts can achieve most of the goals of road widening while improving safety and pollution. Strong Towns in its early days emphasized building roads in such a way that all built capacity would be used as effectively as possible, but some more recent activists have been unhappy that they aren't more stridently anti-car.

1: http://en.wikipedia.org/wiki/Braess_paradox

Sure

>So I don’t understand why Matt believes that building a few new apartments in some city - a very small move along that spectrum - would do anything other than make local prices go up.

Huh? Other than friends, none of the previously mentioned amenities are provided by apartment buildings.

Adding commercial real estate to a city adds jobs and amenities that make it more desirable, and thus more expensive.

Adding more housing does not.

That said, adding more housing raises the demand for commercial real estate (more available workers and customers), hence the cycle that leads to very dense, very expensive places like Manhattan. Strictly speaking though, adding apartments alone isn't enough to keep that cycle going.

Initially, geographic advantage (such as being near harbour, river, or some other geographic feature) gives a settlement that's not yet a city a big advantage in attracting more people there. This in turn, forces the city to grow as more people cram in.

To artificially build denser by policy doesn't produce opportunities - those opportunities would have to be there first! And it's this "expensiveness" of creating more accomodation in the city that causes the city to expand.