Economics of Vehicle Safety

With all the news of Toyota's safety concerns, Washington has decided to step in, even to the point of demanding the president of the company appear before Congress. Not surprisingly the meeting looked less like concern for public safety and more like a political circus. The Chicago Tribune recently published a great article on how the federal government's response ignores customer response:

Then there was the reaction from customers, the very people whose lives and safety are at stake every time they get in a car. In the first four months of this year, Toyota's U.S. sales did not fall, as you might expect. They rose by 12 percent.

and previous private sector success:

"automakers have developed many of today's significant safety innovations without a government mandate, including anti-lock brakes, electronic stability control, adaptive headlights, side airbags and curtains, front passenger safety belt reminder systems and advanced collision avoidance features like lane departure warning, blind spot monitors and adaptive cruise control."

Those improvements are among the reasons that last year, the number of traffic deaths was the lowest since 1954 — even though there are twice as many drivers, traveling four times as many miles, as there were back then.

and possible public sector failure:

What they are inclined to forget is that mandatory vehicle improvements don't come free. Those black boxes, for example, could cost hundreds or thousands of dollars apiece.

New cars have more safety features than older ones, so someone who trades in an old vehicle is likely to increase her life expectancy. Regulations that raise the price of a new car shut some buyers out of the market. So tougher federal rules may have the perverse effect of leading to more traffic fatalities.

If so, don't expect Congress to hold a hearing.