Paying the price for eTag

I love the eTag system in Melbourne and now being rolled out throughout the country. No queuing to pay tolls. No worrying about having change. Just go and listen to the beeps fly.

Amy Finkelstein (MIT) has examined whether the move to electronic toll collection has raised toll rates. The hypothesis is that when you don’t have to work to pay you don’t pay as much attention to how much you pay. Not suprisingly, it is easier to get away with raising tolls. She finds that in the US, when electronic tolling comes in rates are 20 to 40 percent higher than they otherwise would have been. You might think that is a price worth paying for the ease of use. But apparently so do other drivers with toll increases have a lower deterrance effect on actual driving.

In Australia, the tolls are regulated. So you might think that we are OK. But think again. Being able to increase tolls without cost is something a government can utilise as much as any private company. So if we can’t be vigilant at the tolls we will have to be more vigilant at the polls.

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