Highway to Irrelevance: The Decline and Fall of the Maine Turnpike Authority, Part 3

Suppose you run a business, but your operating costs are increasing and people aren't buying what you're selling like they used to.

If you operate in the free market, you'd better cut back, reduce overhead, and either lower your prices or make big improvements in your product to bring your customers back.

If you're a dinosaur bureaucracy like the Maine Turnpike Authority, on the other hand, you keep on offering the same product, raise your prices 30%, and keep on planning a $200 million expansion based on chimerical growth projections.

It's sad but true. The Maine Turnpike witnessed a 2% decline in traffic this past year - the first decline in traffic in the toll road's 61 year history. At the same time, basic freeway maintenance costs are up nearly 40% since 2005.

Maine drivers and shippers are desperate for alternatives to the Maine Turnpike's 1950s-era transportation "solution." Their product sucks: why would anyone choose to pay more to spend unproductive time behind a steering wheel, when one could take the wi-fi-enabled Downeaster instead? Or enjoy the guilty pleasure of a mediocre movie on one of Concord Coach's hourly buses?

But instead of improving their product (say, by offering their own wi-fi-enabled commuter buses) the Turnpike Authority has decided to keep their crappy thing going, only at higher prices. Beginning February 1st, tolls on the Turnpike will be 30% higher.

The Turnpike Authority is obviously unfamiliar with basic economic theory, which maintains that an increase in your prices will generate a decrease in sales (or tolls, in this case). A meta-analysis of 101 studies on gasoline price elasticity by economist Molly Espey found that the short-run price elasticity of demand for gasoline is -0.26, and the long-term price elasticity is -0.58.

In other words, a 10% increase in this particular cost of driving will result, on average, in a 2.6% decline in driving in the short term, and a 5.8% decline in the long term.

Here's the takeaway: if you're talking about a 30% increase in tolls, as the Turnpike proposes, then we can expect a lot more people to try carpooling, or the bus, or the train, or staying at home. So once again, alternative transportation advocates can take heart in the Turnpike Authority's head-in-the-sand management: tolls go up, fewer people drive, and we get cleaner air and safer streets. Thanks, Maine Turnpike Authority!