Is The Peltzman Effect A Fiction?

Nader.jpgWe’ve discussed the Peltzman effect before on this blog. The “Peltzman effect” describes a supposed phenomenon wherein the utility of new safety devices – like seat belts in cars – is offset by the new risks that it encourages people to take.
Put seatbelts in cars, the thinking goes, and it will just encourage people to speed, thus negating a lot of the benefit of having seat belts in the first place. Put a new safety guard on a cutting machine and it will just make people more careless.
The Peltzman effect is an important enough result that it is taught in many introductory level economics classes. In fact, the Peltzman Effect is extensively cited in the first chapter of Greg Mankiw’s “Principles of Economics” – the most widely-used undergraduate econ textbook in the country – as an illustration of principle Number Four of the “Ten Principles” of economics, which states, “People respond to incentives.” The passage in Mankiw’s “Principles” suggests that the benefit of Ralph Nader’s work in getting seat belts installed in cars was offset by the greater number of accidents that resulted from people’s driving at higher speeds. For a lot of economists, Peltzman’s work, originally published in 1975, sounded the death knell for the type of consumer crusading favored by people like Nader.
But a new, soon-to-be-published study by economist Bae Yong-Kyun, calls the Peltzman effect into question. (H/t Tyler Cowen). Unlike most previous researchers, Yong-Kyun does not draw upon state-level accident data. Yong-Kyun findings are that mandatory seat belt laws actually cause people to drive more carefully rather than less carefully. The paper finds that the offsetting effects found by Peltzman do not exist when all accidents, including fatal accidents, are factored in.
It may be that it is the Peltzman effect that is unsafe at any speed.

This blog in maintained by the Boston car accident lawyers at The Law Office of Alan H. Crede, P.C.