Economics: Moral Hazard

As cars have gotten safer, accidents have gone up.  Weird, huh?

But it makes sense.  Consider this:

If you took 100 people and had them drive around a town in new modern cars complete with anti-lock brakes, seat belts, energy absorbing frames and air bags, they would have some number of accidents; call it X.

Take those same 100 people in that same town and have ’em drive around.  Except this time, give ’em an old 62 Buick-and take out even that crummy seat belt.  Oh yeah, one more thing, attach a sharp stake coming out of the dashboard, sharp point out, aimed right at your chest.  How carefully do you think people would drive?  Think there would be fewer accidents?  Heck, whole groups of people might reduce their amount of driving, some probably wouldn’t drive again.

Again, weird huh?

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