Externalities and biases
A while ago, the Insurance Institute for Highway Safety, (IIHS) published videos and results from crash tests they conducted using some compact cars crashing into mid-sized ones. The results appeared alarming, with the smaller vehicles apparently not fairly all that well. The upshot, as far as IIHS was concerned, was that small cars are bad for safety.
Well, that’s one, very simplistic interpretation. A conclusion laden with a barely hidden bias.
To begin with, the clear implication the IIHS is spreading is that small cars are just inherently unsafe. Period. If you pushed them on it, they would almost certainly deny that that is what they are saying, or even implying, but it is. And the reason they would deny it is because it’s not true.
The Smart car, as well as the Yaris, have been sold in Europe and other parts of the world for years before coming to the U.S. and they have a safety record that is generally no worse than other vehicles. And all three vehicles have performed well in most, if not all, standardised crash tests until the IIHS’s newly concocted demonstration. That doesn’t mean that they are the safest vehicles, or that they couldn’t be safer, but inherently unsafe they are not.
Are they likely to be less safe places to be in a crash against a hulking truck, than in the hulking truck? Yes. And the IIHS is correct in saying that is a simple matter of physics. The smaller vehicle, and its occupants, having less mass in the collision, will decelerate at a much faster rate (or even be pushed back). That means that the occupants of the smaller vehicle will experience more force in the impact. The smaller dimensions of the vehicle also mean there is less material and leeway for the force of the impact to be absorbed and dissipated by the vehicle structure.
The problem is the IIHS conclusion and recommendation, which is not the only possible response to such a dilemma, and displays a clear bias. It also arguably imposes much greater social costs than the alternatives.
The IIHS recommend that we keep larger vehicles, but spend more money on making them more fuel efficient. (They seem to ignore the irony in that larger vehicles will never be as efficient as smaller vehicles, as a matter of simple physics. I guess calling on physics wasn’t quite so convenient in this case.) So their solution is to keep “unsafe” smaller vehicles off the road.
But what about taking dangerous larger vehicles off the road instead?
As the second WSJ article cited points out, the “danger” of the smaller vehicles is primarily in the disparity of the size of vehicles on the road today. One way to reduce that is to take the larger ones off the road.
You can do that by discouraging the sale of new larger vehicles and encouraging the disposal of existing larger vehicles. You can do the former simply by raising fuel prices, or an even more sensible way would be to impose a carbon tax. This means that manufacturers can certainly make their vehicles more efficient by producing larger hybrids or diesel vehicles, and you leave the consumers the choice of purchasing such vehicles. But, it will always be cheaper to buy smaller vehicles. (That damned physics again.)
This would also have the effect of encouraging people to junk older, heavier (and larger) vehicles because it would be too expensive to run. The government could even add an extra incentive for junking those vehicles. (This would probably be most effectively, and most efficiently, used for providing an incentive for poorer owners of older vehicles, for whom the purchase price of newer and more efficient vehicles might be an insurmountable hurdle otherwise.)
As suggested by Mr. Wenzel in the article, the government could provide a certain amount of relief for people who really do need to use the larger vehicles for work, as opposed to just posing. Although, to be fair, any such subsidies should be put in place to be phased out over time. How is that fair, especially on businesses? Externalities.
Externalities are also the reason why its in some ways more “fair” to take the larger vehicles off the road. It’s the larger vehicles, or rather their drivers, who are imposing a cost on other people by their preference for larger vehicles. Drivers of smaller vehicles are only in more danger because the drivers of larger vehicles pose that danger. It seems to make sense to me to eliminate that externality by encouraging people not to drive larger vehicles.
Now there are businesses which do need larger vehicles to haul cargo, or people, or whatever. And in making an initial transition, it makes good policy sense for the government to ease the burden of change, both to encourage, and so that businesses can make the change. (It’s like helping the poor car owner; businesses might not be able to afford the new vehicles otherwise.)
After the transition, however, it doesn’t make sense for a continued subsidy. Fact of the matter is, even if the larger vehicles are necessary, they still continue to impose external costs on other drivers. So why shouldn’t they pay for that cost through higher prices? Will the businesses pass on those costs of consumers? Absolutely! But there’s no reason consumers who benefit from those businesses should not have to pay also for the external costs imposed on society for their consumption.
Such a policy will also have the benefit of encouraging manufacturer to work on more efficient larger vehicles, as long as they are cost effective, and encouraging businesses to buy smaller, more efficient, vehicles as they can use. I often wonder how many businesses really need the Titan V8 truck, as opposed to the smaller V6 version.
It’s not hard to imagine that this model of vehicle safety would ultimately be less costly to society than the one IIHS is pushing on us.
