The Road to Risk

The world of traffic can be a strange place. Driving, in general, is risky. There are weather events, road hazards, mechanical failures, and any variety of factors that can lead to severe harm. Even with these innate hazards, people seem to have a desire to make it even riskier. From putting on makeup, to texting, to washing your dog, there are any number of activities people do to add risk to their driving habits.

I was thinking about this when stuck sitting in for a day on a court mandated driver education class(speeding, if you’re interested). The instructor of the class spent several hours on the ideas of distracted driving, and emphasizing the costs of getting tickets. As someone with some economics background, the argument of high costs isn’t very persuasive to me. The real question revolves around the balance between costs and benefits. Let’s take a simple example.

Assume you drive two hours per day, every day. If you average ten percent above the speed limit, then every year you will save 73 hours by this action of speeding. Now, ten percent above the speed limit really isn’t much, and something many people are guilty of. It’s also an action very unlikely to get you stopped by police. This equates to going 27.5 in a 25, or 55 in a 50. If you value your time at $20 per hour, then this would save you close to $1,500 a year, which is certainly not a trivial amount of money. If you average 20 percent over the speed limit, you’ll be saving $2,920 a year, though two risks increase here.

The first risk that increases as speed above the limit increases is the chance of getting stopped, and ticketed, though for 20% over, it’s unlikely your fines will approach $3,000. The other risk is the chance of a collision. This is a risk of harm and damage to yourself, and the financial liability of damage caused to others. In Virginia, if you’re caught going 20 miles above the speed limit(33% in a 60) you can be charged with reckless driving and sentenced to up to a year in jail. This is the first point where I can really say the direct costs from the legal system are likely in most cases to exceed the benefit of speeding. The justification for a penalty so severe, is the chance of harm to others. To me, this strikes me as odd.

Why would someone simultaneously mandate that people purchase insurance, thereby decreasing personal liability and risk, and then pass laws specifically designed to increase personal liability and risk? When you mandate insurance, it should not surprise you that people take more risks than are optimal. This is not to be taken as some conspiracy theory, and I like to think that this is just bad reasoning on the part of lawmakers, but the only reason I can think that someone would create such a blatant market inefficiency, is to funnel money away from people, and toward government institutions. This is okay as an idea, it’s called taxation, but taxation should not require a criminal record and possible jail time. It should be clear, and transparent. You are incentivizing people to take riskier actions, then criminalizing those actions. This is even more disturbing given all of the recent tragedies of a routine traffic stop turning into a fatal shooting, and the disproportionate effect this has for people of color. It not only leads to more incidences of unwarranted policing, but opens the door for profiling, and discrimination in uses of force.

There is an argument for insurance, which revolves around the victims of these traffic accidents actually getting compensated for their injuries, but that isn’t very hard to resolve. Simply create a loan program, where if the person who caused the accident does not have the means to pay, they will be loaned the money to pay the liability suit. Then, make it so these loans cannot be absolved through bankruptcy(as student loans are done). While I do have some issues with this idea, I think it would be better for people to make their own, rational, decisions about what levels of risk they are willing to take, than to rely heavily on policing to correct an artificially created market imperfection.

I should note here as a disclaimer, I am not trying to convince you to speed, or take reckless action while driving. Please don’t. I’m merely giving a hypothetical example of one possible tradeoffs someone might use to value their decision, this is in no way a complete analysis, or optimal decision.

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