Amidst the burgeoning advancements in autonomous vehicles (AVs), striking a balance between expectation and reality emerges as a challenge. Rob and Jackie sat down with Richard Mudge, president and founder of Compass Transportation and Technology, to discuss how innovations in the world of AVs can affect safety, productivity, and job creation.

Mentioned

• Michigan.gov. “I-94 Connected & Automated Vehicle (CAV) Corridor Proposed Project,” Michigan Department of Transportation.

Related

• Aswin Prabhakar. “Logic, Not Emotions, Should Guide Autonomous Vehicle Deployment,” (Center for Data Innovation, December 2023).

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Rob Atkinson: Welcome to Innovation Files. I'm Rob Atkinson, founder and president of the Information Technology and Innovation Foundation,

Jackie Whisman: And I'm Jackie Whisman. I head development at ITIF, which I'm proud to say is the world's top-ranked think tank for science and technology policy.

Rob Atkinson: This podcast is about the kinds of issues we cover at ITIF from the broad economics of innovation to specific policy and regulatory questions about new technologies. If you're into this stuff, which I assume you are since you're listening, please be sure to subscribe and rate us. It really helps. So today, we're going to talk about autonomous vehicles or AVs.

Jackie Whisman: Our guest is Dr. Richard Mudge, who is president and founder of Compass Transportation and Technology. The firm specializes in economics, finance, and policy of transportation with an emphasis on autonomous vehicles and shared mobility. Dr. Mudge is a nationally recognized expert in the economics and finance of all modes of transportation. He's currently helping public agencies evaluate and deploy new technologies. Welcome.

Richard Mudge: Glad to be here.

Jackie Whisman: Can you kick us off by defining what you consider an automated or autonomous vehicle? It's probably important to note we're not just talking about commuter cars here when we're framing the conversation.

Richard Mudge: The definition has been a little fuzzy. It's been changing. If you have a fully autonomous vehicle, it may be a vehicle that doesn't even have a steering wheel. Zoox and other companies have built vehicles that have no steering wheel, so they're fully autonomous. You could have a vehicle that does not require a driver and would be fully autonomous, but one of the things that's happening, and I think is very important, is there are an increasing number of vehicles that have all the technology. If you buy a new car, it will have automatic braking, it will have lane tracking. It's not fully autonomous, but it has a lot of that technology in it.

Jackie Whisman: And there's a lot of hype and some fear about AVs, and some might say deployment seems slow. Do you agree with that?

Richard Mudge: I think we've gone through several phases. One was something that I think is safe to call the world of hype. If you go back 10 or 12 years, there were people in the industry saying, "No one will need to have a driver's license." What turns out is this is much harder, from a technological point of view, to actually do this stuff, so it's taken longer. We're now in a world of skepticism. For all the articles you saw 10 or 12 years ago saying you'll have an automated vehicle in front of your house in two or three years, now there are articles saying it may never happen, and I happen to think we're about to be entering a world of reality, where there will be automated vehicles in certain markets. I'm more optimistic now than I was maybe five or six years ago.

Rob Atkinson: Back in the old days, when I was working at the Office of Technology Assessment, OTA, one of the final reports we did, although it never got published because they shut us down, but it was looking at this question of autonomous vehicles. This was 1994, 1995, and what we had written, although as I said we didn't finish the report, was that we estimated 2020, at the earliest, before we'd even see some level of adoption, and we were over optimistic there. I remember about 10 years ago, there's this website, this sort of futurist website that they asked me to be a participant in, and they'd asked these technologists and futurists to go in, "Hey, here's this new technology. What year do you think we'll have 50% adoption?" On autonomous vehicles, it was like, "Oh. Between 12 and 13 years kind of thing."

I was like, "50 years," or something like that. I was like, "2040 at the earliest." I was just so far out in the range, and yet I think that's probably the realistic number now. Do you agree with that, Dick, that it's going to take longer than people thought?

Richard Mudge: Well, it certainly is taking longer than people thought, but I think a lot depends on how you define it, and a lot of this goes back to the era of the world of hype, when the assumption was everybody would have a fully autonomous vehicle at their beck and call whenever they needed it. That's something which may take 30, 40 years before that happens. At the same time, there's a lot of applications out there that are going on right now with fully autonomous vehicles. They're just not things everybody sees. If you look at the mining industry, they've been doing it for more than 20 years. Walmart is now moving goods locally from a distribution center to a store. The Connecticut DOT will be having autonomous buses in operation later this year. There are automated small shuttles that are being deployed, so there's more of it happening. It's just not in the grand scale that everybody will have one at their beck and call.

Rob Atkinson: Recently, I had to go to LAX Airport, and for some bizarre reason, where you get your taxi or your Uber, it's actually a fair hike. You got to really walk, and so there's a shuttle bus that you can take. There's absolutely no reason to have a person on that shuttle bus at some point soon. It's just the same route they take every single time. Would you see some of those as promising applications?

Richard Mudge: Oh, absolutely. There are small shuttle buses that have been used already at retirement communities, on college campuses, and they need a little more testing before they will get into a public place like that. But you look at the companies that are the leaders in automated vehicles for the individuals, is a firm like Waymo, which is owned by Google. You can get a fully autonomous vehicle at the Phoenix airport today. I think their biggest success they've had was moving people around the Superbowl. There's another company, Cruz, owned by General Motors that is a little bit behind them. There's another company, Zoogs, owned by Amazon, so these are just getting started, but in certain, if you're in Arizona, you can pick up your Lyft app and call a fully autonomous vehicle now today.

Rob Atkinson: That's cool.

Richard Mudge: So it's starting.

Rob Atkinson: Yeah. I also was reading John Deere has fully autonomous farming tractors and things like that.

Richard Mudge: Well, that gets back to what I said before. You have to look at specific markets. The farming communities have been using autonomous vehicles for a long time. John Deere gets the most press. They're probably the leader in it, but that's a place where there is no other traffic. It's simple to solve. It's like the mining example. You can have a fully autonomous mining truck, and there's no kids chasing balls down the street. The same thing with John Deere. So I think you'll find more and more specific market applications that will be out there, where it makes sense to do it, but it's not this type of thing that you'll see pulling up in front of your house.

Rob Atkinson: Interesting.

Jackie Whisman: I know you've talked about the potential for AVs to stimulate economic productivity. Can you expand on this?

Richard Mudge: Oh. I think this is the most important thing out there. If you look at the history of infrastructure, there have been several things that have happened that have changed the US economy. The interstate highway system is one example. That accounted for most of the growth in economic productivity in the US for like 20 years. You look at things like the internet and wireless communication, the same thing has happened, and there's a potential with autonomous vehicles to do the same thing. Let me give one example that's not there yet. There's a lot of money going into autonomous trucks, and once that happens, you'll be able to move goods across the country in two or two-and-a-half days, and that means you can have a business in Baltimore that will have a business partner in Portland Oregon, and it totally changes their economic structure. It changes the economies of scale. It changes the economies of scope, and that technology, that should be here soon. That has a massive increase in economic productivity.

Rob Atkinson: Robert Gordon, the well-known economist, I think I would call him an econosceptic or pessimist, because he wrote a book that basically said Growth is over. I was in a meeting, a panel with him one time, and he said that autonomous vehicles will have no impact on productivity, other than you can read your email on the way to work. Clearly did not grasp kind of what you're saying here, Dick. Another one though, you mentioned early on that virtually almost all the new cars, if not all the new cars, have some level of autonomy, the lane tracking, automatic braking, and the like. One of the things that we forget about, I think, in terms of the productivity numbers are the massive increases in productivity from not having as many accidents. Think about the auto insurance claims industry. That's going to go down. The body shop repair industry will see many fewer workers, medical doctors and other things about treating people's injuries, so even without fully autonomous vehicles, these vehicles will end up being much safer. Do you agree with that?

Richard Mudge: Yes, I do. I think that's something which has not been taken into account yet. There's issues about whether everybody follows what their technology is in their car. Consumer Reports has done some studies that show people like to turn some of this stuff off. If we could mandate everybody having this technology in their vehicle, you would certainly save lives. The other thing that would happen though is you'd start to increase the roadway capacity. If I go back, when I was in graduate school many years ago, they talked about the capacity of a highway lane being 1800 vehicles an hour. Now it's standard to talk about 2000, 2200, and what's happened is cars have better brakes, better acceleration, and as you start to have these vehicles that are being sold now being more common out there, you should have increases in the capacity of roadways. That has true productivity gains around it as well. Yeah, very important.

Rob Atkinson: Absolutely. Your point about people maybe turning them off, my wife's car finally bit the dust after a good long life. It served us well. And so we bought a new Jeep and called up my insurance company about it, and I did not get a discount for all of the safety features on it, including automatic braking. It warns you when you pull out of your driveway if there's somebody behind you, and it has a backup camera. It has all the bells and whistles, which are really, really great, and yet the insurance company did not give a discount. Now, I don't know if that was just the insurance company I have or whether that's something they haven't gotten to, but it seemed to me if insurance companies said, "Hey, by the way, if you're driving this car, you get in an accident, and you've turned off your safety features, you're going to have to pay a lot more deductible."

Richard Mudge: I think that some of that will happen. I do some work for something called the Society of Actuaries, and these are the people who develop the business models for insurance companies, and actuaries are based on what's happened in the past. They want to look at the history of the last five years, the last 10 years. So the problem we have now is, the type of vehicle your wife now has, it's been around two years. There's no history of it, so I think that'll start to change, but it will take a while. I bought a Tesla, because I like the technology. My insurance bill did not go down.

Rob Atkinson: Well, given the fact that a bunch of Tesla drivers seem to be thinking that it is completely autonomous, they can drive with their eyes closed, and then they in a fatal accident, and maybe that's the reason why it goes to this other point, that you have to have some level, humans still are going to play a role, at least, for a long while.

Richard Mudge: Yeah, for a while. I'm not sure how long. I think, for certain types of vehicles, maybe not. If you're driving a large truck on the interstate.

Rob Atkinson: Sure.

Richard Mudge: It's a special-purpose highway. As I said, you're not going to have little kids chasing balls down the street, which you have to worry about if you're going to be driving in the local neighborhood. That's a defined geography. You're going to have an autonomous truck in that market. Now, those vehicles are not going to go into the city. They're going to go off the interstate for maybe half a mile and stop. So I think you need to find specialized markets where the technology can work, and there are quite a few of them out there.

Jackie Whisman: What should governments be doing to help with deployment?

Richard Mudge: I'm a card carrying economist, so I'd like to have the government do as little as possible. So far, it has done as little as possible. You look at the recent Bipartisan Infrastructure Act, it barely mentions automated vehicles. There's no federal program for it. There've been several policy papers put out by the Obama administration, by the Trump administration, by Biden administration, and they all kind of say it's too early to have lots of regulations, but the point you raised is very important. You go back through the history of transportation. It's been a partnership between the public sector and the private sector. With the public sector being the leader in terms of building the roads, providing the transit technology that's out there, this technology, it totally changes that. The private firms really don't need the public sector to do anything. They want to make sure that the roads they drive on are safe, the roads have good lane markings, but they don't need a large public sector investment. Huge, huge change, and I'm not sure the transportation industry is fully ready for all that.

Rob Atkinson: So Dick, I know what you're saying, in the sense of when you wanted to dramatically expand mobility in the USA, the private sector wasn't going to build roads. Here, we're not talking so much about roads. We're talking about the vehicles, and clearly, the private sector is in charge of vehicle development, production, sales, all of that. I get that, but you mentioned the Service Transportation Act. Well, it didn't include anything on trucking, in my understanding, including some possible demonstration programs or places they could test it, because again, my understanding, the teamsters opposed it, and Congress gave into their pressure against the job loss. So I know there's a program in Michigan that an old colleague of ours, you and I, I believe, is running to have a test bed, be able to have companies go and try their things, and also look at the issue of signage, which to me is a public sector role. What about those kinds of things? And you mentioned Arizona. That happens in Arizona, because the government took a bold step and said, "We're going to allow these."

Richard Mudge: Well, I think that what they're doing in Michigan, and it's going beyond that, there's a company called Cavnue, and they have a very interesting business model. They want to build roads or lanes for automated vehicles. I think, by doing that, they'll be able to have greater capacity on it. I think they're also going to be doing it for, as I mentioned before, new cars are not autonomous, but they have a lot of the technology and they're looking at, they have an agreement in Michigan with support from the state DOT to do this between Detroit and Ann Arbor.

I know they're looking at a lot of other markets. I don't think they've talked about which ones they are, but they're doing what, in some sense, the federal government should be doing. If you had a more aggressive, a more technology oriented federal government, they should be doing more things, in my view, to encourage automated vehicles on certain lanes. Now, that would be a major change in how the federal government operates, so I don't think that's likely to happen, but what Cavnue is doing could be revolutionary. And again, that's something that gets no press.

Rob Atkinson: To be fair, good point, but you could imagine other states that have a very, also a forward-looking attitude, partner with them, and have their own special lanes, signage issues, and just saying, "Hey, we're going to allow these more than maybe you could otherwise." In other words, the federal government is, if anything, just sitting back.

Richard Mudge: I think that has happened. I don't know where Cavnue is working. I know they have projects they're going after in San Diego and a few other places, so I am sure they're knocking on a lot of doors of state DOTs to try to get this done faster. As I mentioned before, all new cars have some kind of technology. We need to be tracking that more. What's the impact on safety? How do we get more people to use the technology that's there, because even if it's not fully autonomous, you have a lot of the technology you need that's in those cars.

Rob Atkinson: Why do you think the DOT is, I don't want to say asleep at the wheel, but not as active as they should be in promoting as opposed to regulating?

Richard Mudge: I think they're changing a little bit. I think they're changing now. They're trying to do more. Part of the issue, and this gets into political issues, and it may show why I don't do a lot of consulting for US dot. For a long time, to the year 2000 and on, Federal Highway Administration and a lot of the state DOTs were pushing for something called DSRC. They wanted to have communication between the vehicle and in the infrastructure, and they believed that that was the business model. At the same time, the people in the technology business, the Googles of the world said, "We don't need that. We don't need to communicate with the infrastructure. If you want to communicate with other cars, we'll use cell phones," so USDOT sometimes spent a lot of time and a lot of money on a technology approach that really was not the way the private sector was going. They recognize that now, and they're trying to be more aggressive in what they do, so I think their attitude today is different than it was, say, four or five years ago.

Rob Atkinson: Interesting.

Jackie Whisman: There's lots of worry about job losses. How should we be thinking about this?

Richard Mudge: Well, I think this will generate more jobs than anyone's ever seen, and people focus on jobs by looking at driver losses, truck drivers, and I think that's very limited. If you go back to the productivity gains we talked about earlier, if you're able to increase the size of your business, because you can now be a partner with a company on the other side of the country. There'll be many, many more jobs created. They may not be truck driver jobs, but there will be many, many more jobs. This will stimulate more jobs than anything else we're doing right now within the economy. There've been some studies done. There was a study that Safe did several years ago, that basically said there will be no loss of truck driver jobs for the next 20 years, partly because it takes a while for the technology to happen, and they did not look at the productivity gains that we talked about.

Rob Atkinson: Yeah, and also people overstate the rapidity of which technology gets adopted. It's going to take a long time, as you noted, and I believe there'll be fewer truck drivers, but at the end of the day, that will be dealt with almost 100 percent, I would imagine, by attrition rather than actual layoffs. Trucking is a hard job, and they have a hard time getting people.

Richard Mudge: And this makes their job easier.

Rob Atkinson: So Dick, unfortunately, we got to wrap up. That was really, really interesting. I'm more excited about it than I was before we started. So thanks so much for being here. It was really great.

Jackie Whisman: And that’s it for this week. If you liked it, please be sure to rate us and subscribe. Feel free to email show ideas or questions to [email protected]. You can find the show notes and sign up for our weekly email newsletter on our website itif.org. And follow us on Twitter, Facebook, and LinkedIn @ITIFdc.

Rob Atkinson: We have more episodes and great guests lined up. We hope you'll continue to tune in.

Jackie Whisman: Talk to you soon.