Analyzing the Hidden Costs of EZ Pass Tolls

Electronic Toll Collection Systems like EZ-Pass save drivers time. But passengers who move through tolls more quickly also might be paying more money. Robert Siegel talks about the hidden costs with MIT's Amy Finkelstein.

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ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

And we're on the road in this segment of the program. In a moment, we'll hear about a highway rest stop that's going the extra mile.

First, an economic impact of that life-altering invention, EZ-Pass. That's what many of us East Coast motorists call the device we place on the inside of the windshield or somewhere on the front of the car. You might know it as SunPass or IPass or FasTrak. While others come to a halt at the toll booth to pay a human being, we just slow down to 10 or 15 miles per hour, sometimes to 55, and the device gets red automatically and the toll is deducted on a credit card or a debit card.

I called this life-altering because once you get EZ-Pass or another such device, you have the feeling that the future has begun, and that it is an age in which people will part with their money in ways that their grandparents had never even dreamt of.

So it was with great interest that we read today of some academic research and into EZ-Pass and tolls. Amy Finkelstein is an assistant professor of economics at MIT and joins us from Boston. And I gather that you were no stranger, first of all, to EZ-Pass on the highways.

Professor AMY FINKELSTEIN (Economics, MIT): No, I'm not. I live in Boston but I go back to New York a lot.

SIEGEL: Are you an EZ-Pass user or…

Prof. FINKELSTEIN: I am. In fact, the way - I mean, I'm a public finance economist, so I study the government and government behavior. And the way I got interested in this is that to keep ourselves amused on the road, we once tried to calculate what the actual real cost of our trip was, accounting depreciation on the car, gas, et cetera. And one thing you obviously want to factor in, if you're doing this calculation correctly, which we wanted to, was the toll rate, and we realized we don't really know how much we pay in tolls on the same trip, from Boston to New York each time. And that's what got me thinking about what that might - what affect that might have on what toll rates are, or more generally, if you're less aware of your taxes, how the government might respond in terms of setting tax rates.

SIEGEL: And I gather, what you found, if I understand this, is that once an automatic toll paying system, like EZ-Pass, is installed, typically, you can expect the tolls to go up on that bridge or highway or tunnel.

Prof. FINKELSTEIN: Exactly. Particularly, as the fraction of drivers using electronic toll collection like EZ-Pass increases.

SIEGEL: On the other hand, if a highway or a bridge or a tunnel has already -automates toll-taking, you'd think that its cost would go down because they're employing fewer people to take the tolls.

Prof. FINKELSTEIN: That's right. It is certainly cost saving. On the other hand, it may make it easier to raise revenue to repave the road or extend the road because people are less aware of how much they're paying in tolls.

SIEGEL: And you suspect - although this would be harder to quantify obviously -that consumer or public resistance to increasing the tolls is minimized because the money is leaving our bank accounts so stealthily via EZ-Pass.

Prof. FINKELSTEIN: I did survey people on their awareness of tolls, if they'd recently driven on the Mass Pike. And you've found that people who had paid using cash were much better able to say how much they had recently paid on the toll than people who had paid using EZ-Pass or Fast Lane.

SIEGEL: Have you gotten any feedback on this from highway authorities?

Prof. FINKELSTEIN: I haven't. I talked to a lot of toll authorities to collect the data because you had to get the toll history on all the different roads in the country. And, you know, that was where my northeastern background was a bit of a disadvantage. I spent a while trying to track down a relevant authority in Arizona. And finally, I got an e-mail from them that said there's a reason we called them freeways, lady. Actually, there are no tolls there.

SIEGEL: You know, it's implicit, at least, in your research that there are some toll roads in this country or tunnels and bridges with the fare - the toll hasn't gone up in recent years.

Prof. FINKELSTEIN: Tolls are increased on average, I think, only about every eight years in the data. And that's nominal toll rates, so there's inflation eroding the real cost of the toll. And even with EZ-Pass, I find it the rate of toll increase doubles. But they're still only being raised about every four or five years.

SIEGEL: Well, Professor Amy Finkelstein of MIT, thank you very much for talking with us about EZ-Pass and increasing tolls.

Prof. FINKELSTEIN: Thank you very much for having me on the program.

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