|Technology Doesn’t Always Make the Price Fall|
|Topic||Utility and consumer choice|
|Key Words||tolls, tax, consumers, utility|
|News Story||Is it possible to be willing to pay more for something when you don’t realize that you’re paying for it? Are governments increasing tolls on roads with electronic payments because they can? According to one economist, the answer is yes.
An MIT economist looked at tolls data over the last few decades and came to a startling conclusion: after the creation of electronic payment systems, such as EZ-Pass, on toll roads, the cost of tolls actually rose. It wasn’t instantaneous, but the economist’s argument is that the cost increased because we got used to not physically paying for the toll.
With a system like EZ-Pass, when a car passes a toll collection point, a transponder in the car connects with a reader at the checkpoint, and then automatically deducts the cost of the toll from the owner’s credit card. There’s no payment, no transfer of cash to seal the deal. And once we get used to paying this way, we probably don’t think about the tolls anymore. The computer system is taking care of it.
But, the argument goes, that will make it easier for governments to raise tolls and therefore revenue. If you’re not thinking about it, not physically engaged in the transaction, you won’t notice it, and therefore won’t complain about the increase. There are lots of examples where once an electronic payment system has been introduced, the tolls increased.
In the article, the director of the International Bridge, Tunnel and Turnpike Association suggests that setting tolls isn’t as simple as create an electronic system, wait a while and raise tolls. But the argument makes economic sense, and according to the MIT economist, other arguments aren’t supported by the evidence.
Given that last year over 55% of transactions were done by debit or credit card, consumers are beginning to notice transactions less and less. How long might it be before other prices begin to increase?
|Source||Leonhardt, David. “Technology Eases the Ride to Higher Tolls.” The New York Times, July 4, 2007.|
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