Peltzman Effect: What It Is And What It Explains About Social Psychology

Peltzman effect

Do you know what the Peltzman effect is? It is a phenomenon that a United States (USA) economist, Sam Peltzman, observed in 1975.

This is an effect that is related to laws, government security measures, and risky behavior in society. In this article we will see what relationship exists between these elements, what this effect consists of, and what are the most relevant research of this economist in relation to three types of US laws.

Peltzman effect: what does it consist of?

The Peltzman effect is defined as the tendency of people to adopt more risky behaviors in the face of more security measures. This effect was observed by an economist, professor at the University of Chicago, Sam Peltzman.

Through his studies dedicated to the automobile sector, he saw how, the more safety measures, the more risky behavior on the part of drivers ; That is to say, the number of accidents was not reduced, as expected with these measures.

To this phenomenon, Peltzman gave the following explanation: Drivers “compensated” for these measures by adopting risky and dangerous behaviors (as we have seen, what the economist defined as the Peltzman effect).

Liberal thinkers speak especially of this effect, who believe that if the state offers more protective measures, society will act with more risks and each of us will stop taking responsibility for ourselves and others. In other words: the greater the security, the greater the irresponsibility of citizens in making decisions and the greater their risk.

Research

Sam Peltzman’s research on the Peltzman effect went beyond security measures (or regulations) by the state, and also studied other types of measures/regulations. However, it must be said that his studies on safety were the most relevant.

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Regulation and the natural progress of opulence It was one of Peltzman’s most relevant essays, which deals with economics and state regulations. In it, he establishes five basic premises:

Laws that Peltzman studies

Through his research on the Peltzman effect, Sam Peltzman focuses on studying three types of legislation (laws), of various kinds, in the United States (USA).

Here we will see the conclusions from studying the results of each of these laws, and their relationship with the Peltzman effect:

1. The Traffic and Vehicle Safety Act (1966)

This law was intended to increase safety on the roads and, as a consequence, reduce the number of traffic accidents (and their associated deaths). Statistics for the years 1925-1960 revealed that the number of deaths in traffic accidents decreased by 3.5% per year That is, security had improved (before the Law).

What was this improvement due to? To different factors: driver knowledge, better roads, etc. Specifically, this law was based on the fact that safety on the roads basically depended on the safety elements that cars had, which had the function of protecting their occupants from accidents (rather, from their consequences).

However, Peltzman discovered that these regulations or security measures by the government, indirectly encouraged drivers to engage in more risky behavior because “the greater the protection, the price of being risky was reduced” (that is, there was a “compensation” that the drivers had in mind).

Results

In this way, the additional risks outweighed the benefits of these security measures; However, Peltzman was unable to calculate the exact proportions of these data.

Thus, through this Law, Although the number of deaths (of car occupants) due to traffic accidents was reduced, the number of accidents increased significantly as well as the number of deaths of cyclists, motorcyclists and pedestrians.

In this way, between the years 1966 and 2002 (that is, from the emergence of the Law), total deaths due to accidents decreased by 3.5% per year, the same figure as before the Law, although they did increase. the number of accidents, as we have seen.

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2. The Law on Persons with Disabilities (1990)

Another study that also shows the Peltzman effect. Thus, said law prohibits all types of discrimination against people with disabilities at work and requires that they be offered a job appropriate to their disability.

Before 1990, employment in this group was already increasing. However, after the approval of the law, different studies showed how such employment had been reduced in this group. How could it be? It seemed that the law was having just the opposite effect: creating incentives not to hire people with disabilities.

Specifically, what happened was the following: before the law, some employers hired people with disabilities; Sometimes everything went smoothly, and other times it didn’t, which made the businessman dispense with his services.

What happens with the approval of the Law? That The relative costs of hiring and firing increase If he did not hire a person with a disability, the employer could be accused of discriminating, but if he hired her and then fired her, he could also be accused of discriminating, and the costs were also higher.

Results

According to Sam Peltzman, with the approval of this Law, the employer had to face the cost of hiring and the cost of not hiring However, as the former (hiring costs) were higher, the employer directly tended not to hire people with disabilities.

In this way, the reduction occurred in new hires after the law, and not so much in the dismissals of those who were already working.

3. The Endangered Species Act (1973)

The third Law that Peltzman studied referred to animals in danger of extinction, and in his studies the Peltzman effect also ends up appearing. So, This law had the mission of protecting endangered species and directs the Fish and Wildlife Service (FWS) to determine which species are endangered (or may be in the future) and which are not.

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Thus, the species included in this list were “protected” (since the private owners of their habitat areas could not alter anything that could harm them). What happened? That in 1973, 119 species appeared on the list.

Results

Over the next 30 years, 40 new species were added to the list each year. The results show how in 30 years only 6 species had been able to be “saved” (no longer considered in danger of extinction). So, the results of the law were very negative

How did Sam Peltzman explain this? This researcher refers to a neutralizing behavior of people, which he himself calls “preventive development” And to illustrate it, he gives an example: the woodpecker species. This species resides on farms that have many trees. If the bird appeared on one of these farms, the owners of nearby farms cut down the trees (because if not, they would lose all the wood). The same thing happened with other types of species, which ended up leading to the poor recovery of the species shown in Peltzman’s results.

Conclusions

We’ve seen some of Sam Peltzman’s most impactful studies, illustrating how and why the Peltzman effect occurs. From them we can draw two conclusions: if a security or protection law or regulation is issued, An impact study should first be carried out in terms of behavior

On the other hand, it is important that, after a specific time interval after the approval of a type of Law such as those exemplified, it is convenient to review whether said Law (regulation or measure) has offered positive or negative results in terms of its mission. initial.