Car safety and the economic method

This morning on my painfully slow jog to walk I saw a car get mad at a cyclist that they nearly bowled down.  This is all very typical of Thorndon Quay, but it did get me thinking.  The car turned sharply towards a parking space, actually turning a bit far, and only just avoided crashing into a wall because of how sharply the vehicle could brake.

And here is the thing, if he wasn’t able to brake quickly and comfortably he wouldn’t have made the turn – and if he hadn’t made that turn he wouldn’t have threatened the cyclist, or had a strange opportunity to yell at the cyclist.

So, in this case, the increase in car safety lead to an action that was detrimental – the fact that the probability of injury to the driver was now lower means that he was taking on an action that endangered others.  The increase in car safety effectively lowered the price for taking on an action that had a negative externality!

This is why economics is useful – rather than just taking something at face value (car safety is good) the economic method teaches us to think around the issue, and allows us to understand why something that appears like a good thing at face value may have unintended consequences.

Update:  Rauparaha points out this type of logic is explained better in an early post from Eric Crampton.

  • That reminds me of the banner image on Eric’s blog.

  • @rauparaha

    That is a very good point – will find his introductory post and link to it.

  • I would also note that this is an argument commonly employed by cyclists accused of reckless riding: they usually bear the full cost of their actions while drivers’ reckless actions around cyclists are usually also borne by cyclists. Hence, drivers are probably too reckless and cyclists optimally reckless from a social point of view.

    Non-cyclists rarely seem sympathetic to that line of argument, though =/

  • @rauparaha

    As someone that attempts to run I’m not sure cyclists fully bear the cost of their random braking and swerving around when they are on the shared cycle/walk way on Thordon Quay/Hutt Road. Overtaking me, then arbitrarily braking to look in a shop really does piss me off 😉

  • @Matt Nolan
    I was referring to cyclists on the road. I believe the same holds for cyclists on pavements along Thorndon Quay and the waterfront in Wellington and they are overly reckless; my sympathies definitely lie with runners and walkers there.

  • @rauparaha

    Tbf, it is only a small minority of cyclists that are poorly behaved – much like the cars methinks.

    If we just allowed people to hit other people with baseball bats when they do something like this it would solve all the problems – I had no idea why the guy in my story was so angry at the cyclist.

  • @Matt Nolan
    I hypothesise that it is because they’re punks 😉

  • @rauparaha

    That is testable, we just need to find the person we’re discussing and run the Samuelson punk test (1955).

  • “So, in this case, the increase in car safety lead to an action that was detrimental – the fact that the probability of injury to the driver was now lower means that he was taking on an action that endangered others. The increase in car safety effectively lowered the price for taking on an action that had a negative externality!”

    Isn’t this just the Peltzman effect?

  • @Paul Walker

    Effectively – but that is mainly used in the context of regulation, when I was discussing increasing safety more generally (eg from improving technology and the associated choice of consumers to stick it in their cars).

    The key point of the post isn’t really car safety at all – its just an example of thinking about “social situations” like an economist, something we all know about already 😉

  • There’s an EconTalk podcast from 2006 that covers this topic well: http://www.econtalk.org/archives/2006/11/peltzman_on_reg.html