Business Update with Mark Lacter

Carmageddon economic impact

Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, I think we all know by now the 405 will be shut down this weekend between the 10 and 101 freeways, Mark: What effects will the closure have on the local economy?

Mark Lacter: Well, clearly some people are going to be inconvenienced and some merchants will claim they’ll lose all sorts of business. But you as far as overall economic impact this is basically a non-event - probably causing less of an impact than what you'd see from a power blackout or a really bad winter storm because those situations are unplanned, whereas we've known about the 405 closure for lots of weeks. That's given businesses and individuals a chance to make adjustments to their schedules. So, for example, a trucking company is going to be able to either reroute deliveries or make their runs before or after the closure. Someone planning a wedding that weekend will have had time to choose another date - as would someone wanting to see the Getty Center. Factories won't lose any output because many of them aren't even operating over the weekend.

Julian: This is nothing new to economists.

Lacter: That’s right – the key factor is whether sales are lost forever or just moved around. If they're just moved around, it's not a big deal - and that'll probably be the case with the freeway closure. Matter of fact, some businesses could do better than usual; a restaurant in Sherman Oaks might be especially busy on Saturday night because people who live in the Valley and normally drive to the Westside for dinner are going to be stuck.

Julian: And I see there are folks looking to make a quick buck…

Lacter:Why not? It’s the American way. If you go to a website called car-maggedon.com, there are all sorts of special deals at bars and restaurants - also t-shirts with variations on the "I survived the 405 closure" theme.

Julian: Aside from restaurant plans, what should we look out for?

Lacter: The most interesting question will be how many people heed all the warnings and just stay home. However things go it's going to provide a pretty good insight into consumer behavior - and that's always an important component in understanding how economies work. And everything is going to be localized, which will give advertisers and marketers an unusually good perspective.

Julian: Examples?

Lacter: We'll get some idea about the number of homebodies by looking at the local TV ratings compared with the same weekend a year ago. Will there be a pickup in Internet usage or in the number of movies that are downloaded? I suspect you’ll see more tweeting) than usual because that’ll provide an easy way of communicating tips about traffic conditions - and it could serve as a test case on what would happen during a real emergency, say a serious earthquake. Also, will the areas that are quite a distance from the 405 closure be impacted - places like Disneyland or the Long Beach Aquarium? These attractions usually bring in visitors from all over the region, but perhaps this weekend there will be more locals.

Julian: And let's say that everyone stays close to home on Saturday and there's very little disruption -

Lacter: That could encourage more people to get into their cars on Sunday and cause all kinds of tie-ups. We just don't know, which is one of the reasons this story has gotten so much traction: Fear of the unknown. But I would suspect that at this time next week local officials will have a better idea of how to prepare for next summer's closure of the 405, which will also involve an entire weekend. At least that's the current plan.

Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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