Peltzman Effect
Encyclopedia
The Peltzman effect is the hypothesized tendency of people to react to a safety regulation by increasing other risky behavior, offsetting some or all of the benefit of the regulation. It is named after Sam Peltzman, a professor of Economics at the University of Chicago Booth School of Business.
From the foreword of a talk by Peltzman at the American Enterprise Institute
:
When the offsetting risky behavior encouraged by the safety regulation has negative externalities
, the Peltzman effect can result in redistributing risk to innocent bystanders who would behave in a risk-averse manner even without the regulation. For example, if some risk-tolerant drivers who would not otherwise wear a seat belt
respond to a seat belt law
by driving less safely, there would be more total collisions. Overall injuries and fatalities may still decrease due to greater seat belt use, but drivers who would wear seat belts regardless would see their overall risk increase. Similarly, safety regulations for automobiles may put pedestrians or bicyclists in more danger by encouraging risky behavior in drivers without offering additional protection for pedestrians and cyclists.
The Peltzman effect has been used to explain Smeed's Law
, an empirical claim that traffic fatality rates increase with the number of vehicle registrations per capita, and differing safety standards have no effect. Recent empirical studies have rejected Smeed's Law, which is inconsistent with the observation of declining fatality rates in many countries, along with the associated theory of risk homeostasis
. http://onlinelibrary.wiley.com/doi/10.1111/j.1539-6924.1986.tb00196.x/abstract. Roy Baumeister
has suggested that the use of helmets in football and gloves in boxing lead to examples of the effect.
episode, Woulda, Coulda, Shoulda: "The safer they make the cars, the more risks the driver is willing to take. It's called the Peltzman effect."
From the foreword of a talk by Peltzman at the American Enterprise Institute
American Enterprise Institute
The American Enterprise Institute for Public Policy Research is a conservative think tank founded in 1943. Its stated mission is "to defend the principles and improve the institutions of American freedom and democratic capitalism—limited government, private enterprise, individual liberty and...
:
When the offsetting risky behavior encouraged by the safety regulation has negative externalities
Externality
In economics, an externality is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit...
, the Peltzman effect can result in redistributing risk to innocent bystanders who would behave in a risk-averse manner even without the regulation. For example, if some risk-tolerant drivers who would not otherwise wear a seat belt
Seat belt
A seat belt or seatbelt, sometimes called a safety belt, is a safety harness designed to secure the occupant of a vehicle against harmful movement that may result from a collision or a sudden stop...
respond to a seat belt law
Seat belt legislation
Seat belt legislation requires the fitting of seat belts to motor vehicles and/or the wearing of seat belts by motor vehicle occupants. The U.S. state of Wisconsin introduced legislation in 1961 requiring front seat belt anchorages to be fitted to cars. The Australian state of Victoria mandated...
by driving less safely, there would be more total collisions. Overall injuries and fatalities may still decrease due to greater seat belt use, but drivers who would wear seat belts regardless would see their overall risk increase. Similarly, safety regulations for automobiles may put pedestrians or bicyclists in more danger by encouraging risky behavior in drivers without offering additional protection for pedestrians and cyclists.
The Peltzman effect has been used to explain Smeed's Law
Smeed's law
Smeed's Law, named after R. J. Smeed, who first proposed the relationship in 1949, is an empirical rule relating traffic fatalities to traffic congestion as measured by the proxy of motor vehicle registrations and country population. Thus, increasing traffic volume leads to an increase in...
, an empirical claim that traffic fatality rates increase with the number of vehicle registrations per capita, and differing safety standards have no effect. Recent empirical studies have rejected Smeed's Law, which is inconsistent with the observation of declining fatality rates in many countries, along with the associated theory of risk homeostasis
Risk homeostasis
Risk homeostasis is a hypothesis about risk, developed by Gerald J.S. Wilde, a professor emeritus of psychology at Queen's University, Kingston, Ontario, Canada. This hypothesis is elucidated in Wilde's book. The idea of risk homeostasis has garnered criticism. The hypothesis of risk homeostasis...
. http://onlinelibrary.wiley.com/doi/10.1111/j.1539-6924.1986.tb00196.x/abstract. Roy Baumeister
Roy Baumeister
Roy F. Baumeister is Francis Eppes Professor of Psychology at Florida State University in Tallahassee, Florida. He is a social psychologist who is known for his work on the self, social rejection, belongingness, sexuality, self-control, self-esteem, self-defeating behaviors, motivation, and...
has suggested that the use of helmets in football and gloves in boxing lead to examples of the effect.
Media
This effect is referenced in the 9th season CSI: Crime Scene InvestigationCSI: Crime Scene Investigation
CSI: Crime Scene Investigation is an American crime drama television series, which premiered on CBS on October 6, 2000. The show was created by Anthony E. Zuiker and produced by Jerry Bruckheimer...
episode, Woulda, Coulda, Shoulda: "The safer they make the cars, the more risks the driver is willing to take. It's called the Peltzman effect."
External links
- Sam Peltzman on IDEAS at RePEcResearch Papers in EconomicsResearch Papers in Economics is a collaborative effort of hundreds of volunteers in 57 countries to enhance the dissemination of research in economics. The heart of the project is a decentralized database of working papers, preprints, journal articles and software components. The project started...
- Sam Peltzman podcast Interview at EconTalkEconTalkEconTalk is a weekly podcast hosted by professor Russell Roberts at George Mason University. Roberts interviews guests—often professional economists—on topics in economics....
- "Regulation and the Wealth of Nations" (New Perspectives on Political EconomyNew Perspectives on Political EconomyThe New Perspectives on Political Economy is a peer-reviewed semi-annual bilingual interdisciplinary open access scientific journal that publishes papers related to political economy mainly from the point of view of Austrian economics and liberty-oriented thinking...
. Volume 3, Number 2, 2007, pp. 185 – 204) - In "Scrap the Traffic Lights" John Stossel shows some concrete examples.