Risk compensation

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Friday, Sep 29, 2006

In my post about aggressive driving, I mentioned that particular species of economic reasoning that holds you are less safe if you wear seat belts, because you will drive more recklessly—you diminish your incentive to be careful by having taken safety procautions earlier. Steven Landsburg makes that classic case in the first chapter of The Armchair Economist. Mark Thoma has another example here, where he links to a study that reveals “Cyclists who wear helmets are more likely to be knocked off their bicycles than those who do not, according to research. Motorists give helmeted cyclists less leeway than bare-headed riders because they assume that they are more proficient. They give a wider berth to those they think do not look like ‘proper’ cyclists, including women, than to kitted-out ‘lycra-clad warriors.’ ” Tyler Cowen takes the opportunity to remind readers of the Tullock Effect, which argues that the most important safety device one could add to a car is a spike mounted on the steering wheel pointed at the driver’s heart.


This is precisely the sort of economic thinking that non-economists find baffling, if not repellant, because it seems smugly contrarian, mimicking the perversity tropes that Alfred Hirschman has identified as the hallmarks of reactionary rhetoric. Not only do helmets not make you safer, they put you at greater risk. When you make your silly little attempts at affecting what will happen to you, you actually undermine yourself. But economists aren’t typically reactionaries. They seem to prefer to see themselves as radical truth-tellers, burning away clouds of rationalization and demogoguery to reveal the consequences of incentives at work. But I wonder if there isn’t some kind of risk compensation going on for economists themselves, snug in the safety of their own mathematical models, protecting from the ambiguities in the world that they have rendered invisible.

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