How Safety Can Create Danger

Sometimes making behavior safer creates more danger.

Risky Behavior

Drivers

Studies indicate that initially antilock brakes did not reduce the number of car crashes. The reason? Knowing that antilock brakes increase auto safety, certain drivers became more reckless because an accident was less likely. Similarly, with studs on our tires, we drive faster when it snows.

According to a Canadian psychologist, we even have a “risk thermostat.” A safer environment elevates its setting.

Hockey Players

Mandatory helmets also can have unintended consequences. After the National Hockey League required them for new players in 1979, there were fewer head fractures and more spinal injuries. Wondering why, several specialists concluded that the helmets and full face masks encouraged more of a hard hitting aggressive strategy.

Homebuyers

The National Flood Insurance Program was supposed to solve several problems. So yes, it became available–perhaps too available. The insurance was so cheap that people were happy to pay for it. The result was what insurers call repetitive loss properties.

Financial Institutions

Very large banks whose demise would affect the entire banking system (and perhaps the whole economy) are called “Too Big To Fail.” However, knowing that a bank won’t fail could create risky behavior. Also called moral hazard, we boost bankers’ speculative inclinations by providing a safety net.

Our Bottom Line: the Peltzman Effect

A professor emeritus at the University of Chicago economist, Sam Peltzman, has hypothesized that risk diminishing regulation has unintended consequences. Called the Peltzman Effect, sometimes the new incentives created by a risk reducing rule offset its benefit. The reason is the law of demand that tells us if price rises then quantity goes down and price down, quantity up. Correspondingly, when the cost of risk becomes cheaper, we might be willing to accept more of it.

Sources and resources: To read more about “Why Safety Can Be Dangerous and How Danger Makes Us Safe,” I recommend Greg Ip’s (WSJ journalist) book Foolproof. As for my examples, we’ve looked at several, here and here in the past.