Russ Roberts

Peltzman on Regulation

EconTalk Episode with Sam Peltzman
Hosted by Russ Roberts
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Sam Peltzman of the University of Chicago talks about his views on safety, regulation, unintended consequences and the political economy of bad regulation. The focus is on his pioneering studies of automobile safety and FDA pharmaceutical regulation and the perverse incentives that even good intentions can produce.

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Readings and Links related to this podcast

Podcast Readings
HIDE READINGS
  • Bibliography of Peltzman's work
  • Peltzman, Sam. "Regulation and the Natural Progress of Opulence," AEI-Brookings Joint Center for Regulatory Studies
  • The two papers discussed are:
      Peltzman, Sam. "The Effects of Automobile Safety Regulation." The Journal of Political Economy, 1975, 83(4), pp. 677-726.
    • Peltzman, Sam. "An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments." The Journal of Political Economy, 1973, 81(5), pp. 1049-91.
  • "Drug Lag" by Daniel Henninger in the Concise Encyclopedia of Economics. Peltzman and the FDA.
  • "Unintended Consequences" by Rob Norton in the Concise Encyclopedia of Economics.
  • Peltzman Effect in Wikipedia
  • Unsafe at Any Speed by Ralph Nader, 1965, at amazon.com
  • Highlights

    Time
    Podcast Highlights
    HIDE HIGHLIGHTS
    0:42Automobile safety regulation
    1:37Seatbelts lower the price of safety, which causes people to take more risks
    6:17What were the reactions to Peltzman's findings?
    9:18Regulations change incentives
    11:12Non-economists' disbelief
    16:10Income effect: Hasn't demand for safety increased without government intervention as income has increased?
    20:02Unregulated innovations: turn-signals, rear-view mirrors. Unintended consequences of regulated changes: airbags.
    23:47FDA regulations, drug safety
    35:00Home-made deregulation, AIDS epidemic. World without the FDA, counterfactual (baseline comparison)
    42:19Why do these regulations persist?
    Mailbag (Time mark 47:56)
      On Ticket Scalping and Opportunity Cost: Josh Knox asks his friends a question posed by Mike Munger: Why am I reluctant to buy a ticket from a scalper for $1000, but likely to use one--rather than sell it for $1000--if I find it on the ground? Is that irrational? Maybe it's fear of fraud or the underground element in dealing with a scalper.

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    COMMENTS (1 to date)
    chad writes:

    I disagree with the 'bad reputation' idea. I think that it has more to do with anchoring and risk aversion. In other words, when I find the ticket I view it more as a 'free ticket' than as a 'free thousand dollars'.

    People also tend to be more risk averse than rational. So in the first case I can predict that after the concert I will be worse off than I was before the concert by $700 (assuming that I was willing to pay $300). But in the second case (finding and using the ticket) I am no worse off than before financially plus I have seen the concert.

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