Steven E. Landsburg - The Armchair Economist

Chapter 1

How Seat Belts Kill

Most of economics can be summarized in four words: People respond toincentives. The rest is commentary.

People respond to incentives sounds innocuous enough, and almosteveryone will admit its validity as a general principle. Whatdistinguishes the economist is his insistence on taking theprinciple seriously at all times. I remember the late 1970s andwaiting half an hour to buy a tank of gasoline at a federallycontrolled price. Virtually all economists agreed that if the pricewere allowed to rise freely, people would buy less gasoline. Manynoneconomists believed otherwise. The economists were right: Whenprice controls were lifted, the lines disappeared.

The economists faith in the power of incentives serves him well, andhe trusts it as a guide in unfamiliar territory. In 1965, RalphNader published Unsafe at Any Speed, a book calling attentionto various design elements that made cars more dangerous thannecessary. The federal government soon responded with a wide rangeof automobile safety legislation, mandating the use of seat belts,padded dashboards, collapsible steering columns, dual brakingsystems, and penetration-resistant windshields.

Even before theregulations went into effect, any economist could have predictedone of their consequences: The number of auto accidents increased.The reason is that the threat of being killed in an accident is apowerful incentive to drive carefully. But a driver with a seatbelt and a padded dashboard faces less of a threat. Because peoplerespond to incentives, drivers are less careful. The result is moreaccidents.

The principle I am applying is precisely the same one thatpredicted the disappearance of gasoline lines. When the price ofgasoline is low, people choose to buy more gasoline. When the price ofaccidents (e.g., the probability of being killed or the expectedmedical bill) is low, people choose to have more accidents.

You might object that accidents, unlike gasoline, are not in any sensea good that people would ever choose to purchase. But speed andrecklessness are goods in the sense that people seem to want them.Choosing to drive faster or more recklessly is tantamount tochoosing more accidents, at least in a probabilistic sense.

An interesting question remains. How big is the effect in question?How many additional accidents were caused by the safetyregulations of the 1960s? Here is a striking way to frame thequestion: The regulations tend to reduce the number of driver deathsby making it easier to survive an accident. At the same time, theregulations tend to increase the number of driver deaths byencouraging reckless behavior. Which effect is the greater? Is thenet effect of the regulations to decrease or to increase the numberof driver deaths?

This question cannot be answered by pure logic. One must look atactual numbers. In the middle 1970s, Sam Peltzman of the Universityof Chicago did just that. He found that the two effects were ofapproximately equal size and therefore cancelled each other out.There were more accidents and fewer driver deaths per accident, butthe total number of driver deaths remained essentially unchanged.An interesting side effect appears to have been an increase in thenumber of pedestrian deaths; pedestrians, after all, gain nobenefit from padded dashboards.

I have discovered that when I tell noneconomists about Peltzmansresults, they find it almost impossible to believe that people woulddrive less carefully simply because their cars are safer.Economists, who have learned to respect the principle that peoplerespond to incentives, do not have this problem.

If you find it hard to believe that people drive less carefully whentheir cars are safer, consider the proposition that people drive