{"id":2392645,"date":"2025-03-20T02:15:00","date_gmt":"2025-03-20T06:15:00","guid":{"rendered":"https:\/\/monetizemail.com\/magatoon\/?p=2392645"},"modified":"2025-03-20T06:56:30","modified_gmt":"2025-03-20T10:56:30","slug":"crop-insurance-nascar-and-seatbelts-why-the-safer-we-get-the-more-risks-we-take","status":"publish","type":"post","link":"https:\/\/monetizemail.com\/magatoon\/2025\/03\/20\/crop-insurance-nascar-and-seatbelts-why-the-safer-we-get-the-more-risks-we-take\/","title":{"rendered":"Crop Insurance, NASCAR and Seatbelts: Why The Safer We Get, The More Risks We Take"},"content":{"rendered":"

In his famously odd 1975 book, Platform for Change<\/em><\/a>, the British business professor Stafford Beer made the following observation:<\/p>\n

\n

So we follow our noses. Our noses are going to be smashed up on the fascia board.<\/p>\n

So we will have an air cushion that inflates when we crash to protect us.<\/p>\n

Now that we can drive much faster and with less regard for others: we shall be all right.<\/p>\n

Don\u2019t you think if we really cared about safety we could consider replacing the inflatable bag with a row of sharp spikes?<\/p>\n<\/blockquote>\n

This is not a serious proposal, you understand.\u00a0<\/p>\n

The \u201csafety spikes\u201d observation has had many authors over the past 60 years, and has taken many forms. It is an illustration of paradoxes ranging from risk compensation to the \u201clemons problem\u201d to \u201cmoral hazard\u201d in insurance. The true first author may never be known.<\/p>\n

But it seems that a plausible \u201cfirst,\u201d at least in terms of the particular<\/em> phrase given here, is Gordon Tullock in the early 1960s. The general phenomenon is now called \u201crisk compensation,\u201d or the tendency for improvements in safety to have unintended consequences of increased risk-taking. (For more on Stafford Beer, see this<\/a>\u2026.)\u00a0<\/p>\n

Tullock\u2019s Original Intuition<\/strong><\/p>\n

This story was told by Richard McKenzie in an EconLib remembrance<\/a> fifty years after the events described:<\/p>\n

\n

I remember, as a young graduate student in the early 1970s, listening to several faculty members in the foyer discussing the case for regulating the internal safety of automobiles, then an emerging hot political topic. They were refining standard arguments regarding mandates for the installation of seatbelts, collapsible steering columns, padded dashes, and airbags, all proposed to save lives.<\/p>\n

Gordon emerged from his office on hearing the discussion and insisted: \u201cYou have it wrong! Interior safety features in cars will reduce the costs of accidents for drivers and encourage them to drive more recklessly, causing more pedestrian deaths. To reduce deaths, the government should require the installation of a dagger at the center of the steering wheel with its tip one inch from the driver\u2019s chest.<\/em> Who would take driving risks then?\u201d (emphasis added)<\/p>\n<\/blockquote>\n

McKenzie left the University of Virginia in 1965, and in his recollection puts the Tullock hallway incident in 1962 or 1963, which means (as far as I can tell) that this is the earliest use of the example. (Charles Goetz tells a similar story<\/a>, for the same time period). That timing makes sense, because a large increase in highway traffic accidents, injuries, and deaths had come about as a result of the expansion of the national highway system, and the increased power and sophistication of auto drive trains and suspensions. The National Traffic and Motor Vehicle Safety Act<\/a> was being formulated, and was passed in 1966, with the first mandatory safety features, including seat belts, becoming law in 1968.<\/p>\n

The idea either spread, or was arrived at independently (as indicated by the Stafford Beer quote at the outset). It wouldn\u2019t have to be a dagger, of course. Neck belts would also be effective<\/a>: buckle a belt around your neck, and in even a minor accident your head would rocket forward through the windshield. But the dagger or \u201cTullock Spike\u201d is an especially powerful image, which, as Don Boudreaux has noted<\/a>, makes it extremely useful as a teaching tool. (The more technical version of the result is now called <\/a>the \u201cPeltzman Effect.\u201d)<\/p>\n

Amusingly, <\/a>Warren Buffett used the image in 1991, in a speech at the business school at Notre Dame<\/a>, to illustrate the problem of taking on excessive risk:<\/p>\n

\n

The analogy has been made (and there\u2019s just enough truth to it to get you in trouble) that in buying some company with enormous amounts of debt, that it\u2019s somewhat like driving a car down the road and placing a dagger on the steering wheel pointed at your heart. If you do that, you will be a better driver \u2013 that I can assure you. You will drive with unusual care. You also, someday, will hit a small pothole, or a piece of ice, and you will end up gasping. You will have fewer accidents, but when they come along, they\u2019ll be fatal.<\/p>\n<\/blockquote>\n

Another interesting application comes from insurance markets, where the question of who should bear risk is called \u201cmoral hazard<\/a>,\u201d a situation where shedding liability for risk changes the level of risk that is taken. This is at the core of Tullock\u2019s original thought experiment, of course: since the driver has less risk of injury, that risk is transferred to pedestrians and other drivers by excessive speed and less care.<\/p>\n

In 2012, the \u201cTullock Spike\u201d came up (though not by name) in a discussion of crop insurance. The idea was that subsidizing crop insurance effectively subsidizes the taking of excessive risk, and reduces the incentives to limit damages, for farmers. \u201cThe indemnity number will go up, especially for corn; more claims are coming in all the time,\u201d said Cory Walters<\/a>, assistant professor in UK agricultural economics.<\/a>\u00a0<\/p>\n

\u201cIf we all had a dagger sticking out of our steering wheels,\u201d Walters continued, \u201cwe\u2019d be more careful [when driving]. But what if crop insurance removes that dagger? How would we drive then?\u201d<\/p>\n

The problem has most directly been recognized in contexts where driving and risk are at the core of the action: the real \u201cNational Sport of America,\u201d NASCAR. Beginning in 1988, NASCAR imposed \u201crestrictor plates\u201d as a safety measure, limiting the air (and therefore the horsepower and speed) of cars. In 2004 an article was published in the Southern Economic Journal<\/em><\/a> that concluded the \u201csafety\u201d measure had actually increased the number of crashes and multi-car pileups, though it had not affected the number of deaths.<\/p>\n

But that is what you would expect. If speeds are suppressed, and safety equipment is improved, the risks of death and serious injury are lowered. The results should be increased selection of risky behavior by drivers, including close drafting and bumping. More recently, in February 2018, NASCAR switched from restrictor plates to the more precise and consistent \u201ctapered spacers,\u201d which have the same effect and the same \u201csafety\u201d rationale. The 2018 NASCAR \u201cCup Series\u201d champion Joey Logano, was just as clear about the likely effect:<\/p>\n

\n

I totally expect to crash more cars [because of the spacers] \u2026.As cars are closer and drivers are more aggressive, a mistake will create a bigger crash. We can\u2019t get away from it\u2026You know how it is when you\u2019re on the highway and they check up right in front of you. You can\u2019t stop quick enough and you\u2019re only going 70, you know? Try going 180\u2026So I assume there will be more crashes. I assume we\u2019re all going to tear more stuff up this year. (AP, 2\/16\/19)<\/p>\n<\/blockquote>\n

Knowing Tullock as I did<\/a>, I imagine that his reaction to the obvious problem of NASCAR drivers increasingly \u201ctradin\u2019 paint<\/a>\u201d would be to point out a dirty secret: NASCAR fans come for the \u201cracin\u2019\u201d, but they stay for the crashes. Using a \u201csafety\u201d rationale, particularly one that reduces injuries but increases the number of wrecks, makes a lot of sense.<\/p>\n

If anybody at NASCAR was serious about wanting fewer wrecks, they\u2019d put Tullock Spikes in steering columns, not little plates in carburetors.<\/p>\n

The post Crop Insurance, NASCAR and Seatbelts: Why The Safer We Get, The More Risks We Take<\/a> was first published by the American Institute for Economic Research (AIER)<\/a>, and is republished here with permission. Please support their efforts.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

In his famously odd 1975 book, Platform for Change, the British business professor Stafford Beer made the following observation: So we follow our noses. Our noses are going to be smashed up on the fascia board. So we will have an air cushion that inflates when we crash to protect us. Now that we can …<\/p>\n","protected":false},"author":90,"featured_media":2324418,"comment_status":"close","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[59],"tags":[],"class_list":["post-2392645","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/posts\/2392645","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/users\/90"}],"replies":[{"embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/comments?post=2392645"}],"version-history":[{"count":1,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/posts\/2392645\/revisions"}],"predecessor-version":[{"id":2392646,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/posts\/2392645\/revisions\/2392646"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/media\/2324418"}],"wp:attachment":[{"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/media?parent=2392645"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/categories?post=2392645"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/monetizemail.com\/magatoon\/wp-json\/wp\/v2\/tags?post=2392645"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}