Peltzman on Regulation
Nov 13 2006

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.

Mailbag (Time mark 47:56)
    • On
Ticket Scalping and Opportunity Cost
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Explore audio highlights, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.
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Nov 20 2006 at 2:41pm

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.

  • 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



Podcast Episode 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?

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