Safety in Transportation: The Role of Government

We can be too safe. Achieving safety costs us time and other scarce resources. For example, if all transportation vehicles were restricted to speeds of one mile per hour, there would be a marked decrease in the accident rate, but few people would find they were better off than they are at present. A good transportation mode is one that gets me to my destination quickly, cheaply, and safely. In general, one attribute can be bettered only by worsening another-that is, additional safety is available only by trading for it higher cost or slower speed. Safety is a scarce resource. To allocate this resource optimally, two basic questions must be answered. What level of safety should we be seeking? (How safe should we be?) What is the least costly way of achieving this level? (In what ways can we buy safety most cheaply?) Transportation safety results from the interaction between passenger, government, law, and the insurance system.1 The unique role each plays in optimizing transportation safety is the subject of this paper. Particular emphasis is given to automobile safety, and the ultimate objective is to identify analytically the proper role of government fiat and regulation in accomplishing society's safety goals. The paper begins with a discussion of concepts used in the subsequent analysis. There follows a consideration of transportation safety in a society with no liability laws and no government controls on transportation but in which the individual can insure himself against certain risks. In such a society, insurance has a somewhat remarkable role, although chaos is the rule. In the next section liability laws are introduced. With liability laws and insurance, individuals are encouraged to act in such a way that a more nearly optimal level of transportation safety is reached. However, as shown in the analysis, there are many practical and theoretical reasons why relying on the market alone, including the legal system and insurance incentives, will not bring society to an optimal level of safety. Thus, the discussion moves on to the ways in which government action might be appropriate to improve or even to replace the operation of market forces as a means of achieving particular safety