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.