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Market Solutions


I recently re-listened to a podcast from EconTalk on Regulation with Sam Peltzman. In it, Peltzman talks about the effects of Automobile safety regulations. The discussion hinges on the empirical fact that regulations have unintended consequences and that some of those are harmful. The example from the paper “The Effects of Automobile Safety Regulation” is that seat belts, air bags save the lives of the drivers and passenger in the cars involved, but they lower the cost of having an accident to the driver. The secondary effects of that cost lowering is drivers are less careful and have more accidents and more non-vehicle death occur.

The real interesting part comes later, about 20 minutes in, about market innovations. Peltzman uses the example of turn signals and rear-veiw mirrors as market innovations that had a profound impact on driver safety. His paper Regulation and the Natural Progress of Opulence, deals with that wealth has on safety. Simply put, the wealthier, in per capita terms, a country is, the more the populace will spend on safety. The marginal costs are far less than the marginal benefit of the new safety features. This concept is also evident in the downward sloping nature of a Kuznets Curve. Where inequality is swapped with safety.

MyFord Sync system

Well this morning, reading up on CES and the new tech gadgets coming out, what do I see? Private safety innovations! Ford adding tweets to its Sync in-car technology. Now at first that might sound trivial, kind of like how does a turn signal make cars safer? Ah, but continue reading please.

Ford Motor Co. is adding Twitter messages and Internet radio to its in-car entertainment and communication service, known as Sync, and suggests that the voice-activated system is safer for drivers than trying to manipulate applications on their cell phones.

It’s widely known that texting while driving causes auto accidents. Arkansas recently put a law into place that bans teens under 18 from texting while driving. (and we all know how well teens listen to authority.) Am I confident that Government will “solve” this problem? Oh Hell NO!

Green said that since Sync uses voice-activated commands, it should make it easier for drivers to keep their attention on the road.

“They’re providing more things for drivers to do, but they’re providing them in an easy way,” he said. “One hopes it’s a net gain.”

It will be interesting to see a study on the effect of this new Sync system compared to other similar model cars on teen texting deaths. My guess is that the new Sync system will see a significant reduction in teen deaths. Will the Market get the accolades for the reduction in deaths? Probably not. But the Market doesn’t opperate on pats on the back. It’s rewards are in profits. Expect to see Ford make a ton of cash on this new system.

Oh yeah and it will be standard on all sync equiped cars.

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  1. September 29, 2010 at 10:37

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