Friday, January 26, 2007

Incentives Matter


One of my favorite examples of this basic economic concept is that drivers can be made more cautious by placing daggers in their steering wheels. It's a powerful example because everyone can relate. It also has symmetry, which allows one to draw out the implications for increasing safety in cars - namely that seat belts may actually lead to more accidents. (Economists Russ Sobel and Todd Nesbit have a great paper on Nascar that investigates this concept.)

This post is not intended to teach about incentives. I'm actually petitioning all of my loyal readers for their help. I originally heard this example attributed to Gordon Tullock, but I've seen other authors cited for this creative tale as well. I'm collecting a list of people who this example has been attributed to. So, if you know of any citations, please post them in the comments or email me.

8 comments:

Matt E. Ryan said...

It was from the Armchair Economist, wasn't it? Alchian sticks in my mind for some reason.

David said...

Yeah, Landsburg cites Alchian in the Armchair Economist, but I've seen other authors cite other people too.

Matt E. Ryan said...

Ironically enough, Russ told me last night that he gets at this question in a footnote in the paper you linked to.

Both he and Leeson immediately chimed in with Tullock.

I think I'm losing this battle.

Bryce said...

Russ published a paper on NASCAR?

Excellent.

TJ said...

Of course, it probably makes more sense to minimize injuries or fatalities rather than accidents per se. Even if there is in fact an inverse relationship between seatbelt use and accident frequency, I would guess that there is a dominating inverse relationship between seatbelt use and mortality/injury rate.

--Tom

Bryce said...

North Carolinians are evidently poor economists:

http://www.ncbi.nlm.nih.gov/entrez/query.fcgi?cmd=Retrieve&db=PubMed&list_uids=8297442&dopt=Abstract

Matt E. Ryan said...

The net effect of seatbelt laws on fatalities was nil; I would suspect that seatbelt laws, in causing more crashes, would probably have an *positive* realtionship on total injuries suffered during crashes. Remember-- seatbelts aren't designed to keep you from getting hurt, they are designed to keep you from getting killed.

Combine that with the distortions to the automobile industry...

Anonymous said...

Maybe our blog hosts should present to the audience economic investigations of such things as bulding codes, especially those regulating the use of electricity, another relatively new technology as is the automobile. Our host somehow believe that our free society puts the burden on the users of a new technology to "debug" its safety aspects one accident at a time, when the probability of those accidents could/should have been foreseen well in advance based on the nature of the invention itself.