{"id":39323,"date":"2017-07-14T05:00:54","date_gmt":"2017-07-14T09:00:54","guid":{"rendered":"http:\/\/quotulatiousness.ca\/blog\/?p=39323"},"modified":"2017-07-13T16:19:15","modified_gmt":"2017-07-13T20:19:15","slug":"the-peltzman-effect","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2017\/07\/14\/the-peltzman-effect\/","title":{"rendered":"The Peltzman Effect"},"content":{"rendered":"<p>The odd situation where increasing the safety of an activity by adding protective gear is offset by <a href=\"https:\/\/fee.org\/articles\/are-seat-belts-making-you-less-safe\/\" target=\"_blank\">greater risk-taking by the participants<\/a>:<\/p>\n<blockquote><p>In the 1960s, the Federal Government \u2014 in its infinite wisdom \u2014 thought that cars were too unsafe for the general public. In response, it passed automobile safety legislation, requiring that seat belts, padded dashboards, and other safety measures be put in every automobile.<\/p>\n<p>Although well-intended, auto accidents actually increased after the legislation was passed and enforced. Why? As [Professor of Economics Steven E.] Lansburg explains, \u201cthe threat of being killed in an accident is a powerful incentive to drive carefully.\u201d<\/p>\n<p>In other words, the high price (certain death from an accident) of an activity (reckless driving) reduced the likelihood of that activity. The safety features reduced the price of reckless driving by making cars safer. For example, seatbelts reduced the likelihood of a driver being hurt if he drove recklessly and got into an accident. Because of this, drivers were more likely to drive recklessly.<\/p>\n<p>The benefit of the policy was that it reduced the number of deaths per accident. The cost of the policy was that it increased the number of accidents, thus canceling the benefit. Or at least, that is the conclusion of University of Chicago&#8217;s Sam Peltzman, who found the two effects canceled each other.<\/p>\n<p>His work has led to a theory called \u201cThe Peltzman Effect,\u201d also known as risk compensation. Risk compensation says that safety requirements incentivize people to increase risky behavior in response to the lower price of that behavior.<\/p>\n<p>Risk compensation can be applied to almost every behavior involving risk where a choice must be made. Economics tells us that individuals make choices at the margin. This means that the incentive in question may lead the individual to do a little more or a little less of something.<\/p>\n<p>[&#8230;]<\/p>\n<p>The fact that incentives reduce or increase behavior is an economic law: Landsburg posits that \u201cthe literature of economics contains tens of thousands of empirical studies verifying this proposition and not one that convincingly refutes it.\u201d Incentives change the effectiveness of government policy and shape day-to-day life.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>The odd situation where increasing the safety of an activity by adding protective gear is offset by greater risk-taking by the participants: In the 1960s, the Federal Government \u2014 in its infinite wisdom \u2014 thought that cars were too unsafe for the general public. In response, it passed automobile safety legislation, requiring that seat belts, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":35193,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[25,84,66,13],"tags":[111,755,139,661],"class_list":["post-39323","post","type-post","status-publish","format-standard","hentry","category-economics","category-government","category-health-science","category-usa","tag-cars","tag-incentives","tag-psychology","tag-regulation"],"jetpack_featured_media_url":"https:\/\/quotulatiousness.ca\/blog\/wp-content\/uploads\/2016\/06\/favicon.png","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-aef","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/39323","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=39323"}],"version-history":[{"count":1,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/39323\/revisions"}],"predecessor-version":[{"id":39324,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/39323\/revisions\/39324"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media\/35193"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=39323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=39323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=39323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}