An illusion of safety

Here's a way to make driving safer:  make it riskier.

A German safety expert recommends we raise speed limits on our roads, not lower them.

Ulrich Mellinghoff, head of safety at Mercedes-Benz, argues that raising the top speed on long stretches of Australia's roads to 130 or 140km/h could help combat driver fatigue.

Mellinghoff's argument is counter-intuitive.  It will definitely make driving feel less safe, but it could result in fewer accidents.  And it fits in with an increasing body of knowledge that suggests government attempts to protect us are have the opposite effect -- making us less safe and, crucially, less able to manage risk.

We've had widely owned, personal transport for more than a century now.  And we've learnt a lot about safety in that time.  The University of Chicago economist Sam Peltzman famously studied the results of the American 1966 Motor Safety Act that mandated new car safety standards.  Instead of making driving safer, Peltzman found, the new standards prompted drivers to be more reckless on the roads, and endangered the lives of pedestrians.  Other risk analysts have found the same occurred when seatbelt laws were introduced around the world.

Economists call that ''moral hazard'' -- when people feel they are insulated from the consequences of their actions and behave differently as a result.

In 2007, a researcher in Bath, England, attached proximity sensors to his bicycle to see how car drivers responded to his bike helmet use.  On average, cars came nearly 10 centimetres closer when he wore a helmet than without.  Drivers acted much more dangerously because they assumed the rider was safe.  These problems aren't limited to road safety.

The insurance industry is acutely aware that some customers fail to protect their property when it's insured.  Bushwalkers venture further away from civilisation if they believe search and rescue will be there to help them.

Researchers have even found the introduction of improved ripcords on parachutes did not lower the incidence of skydiving accidents.  Instead, they just encouraged skydivers to pull their cords later.

We saw the moral hazard dynamic play out most dramatically in 2008, as the global financial crisis looked set to sweep away the entire world economy.  Wall Street made riskier and riskier financial trades and employed ever more complex and precarious financial instruments because of an assumption, cultivated over decades, that if they got in too much trouble the government would bail them out.  It would be bad if they lost their financial gambles.  But they wouldn't lose the business over it.  They were too big to fail.

Calling a company ''too big to fail'' is a self-fulfilling prophecy.  The marketplace starts to imagine the company is unsinkable and relies on it.

Having bailed out other firms, the market really went into free fall when the US government declined to bail out Lehman Brothers in September 2008, dramatically reversing that assumption.

It wasn't the government's failure to bail out Lehman Brothers that caused the panic.  It was implying they would do so, and at the last minute whipping the protective blanket away.

The long-term cause of the financial crisis was the suggestion the government would do anything to protect bankers.  The short-term cause was that it didn't.

This isn't an argument against seatbelts or bike helmets.  Seatbelts combined with drink-driving laws, education and cultural change have reduced Australia's road toll significantly.  But it should be a warning:  many of the well-meaning attempts to make us safer are counterproductive, making us more likely to take risks, and less likely to think about the consequences.

There are solutions.  In a revolution in traffic management across Europe, a number of towns are removing traffic lights, stop signs, and other road markings.  Once eliminated, drivers enter intersections more slowly and more attentively.  Instead of focusing their attention on signs, they make eye contact with other drivers.  They negotiate.  Accidents in these towns have dramatically declined.

The Dutch have been experimenting with ''shared streets'', where the barriers between pedestrian walkways and roads are eliminated.  Again, this sounds abominably dangerous.  But when guard railings between the footpath and the road were removed from London's Kensington High Street, accidents fell by 47 per cent.

A spontaneous order emerges when people feel they are fully responsible for their own driving.  And it's a safer one than in a traffic management system that tries to push drivers along pre-determined paths, barking orders along the way.

It's like the spontaneous order that emerges in society and markets when people are responsible for their actions.  So let's hope risk and reward can be rejoined in the financial sector too.

We talk a lot about helicopter parents who over-parent and insulate their children from the world.  The obvious downside of this kind of parenting is that children learn nothing about managing danger.

Perhaps it's time to talk about helicopter governments as well:  always hovering above their citizens, ready to swoop in the moment they stray off the safest path.

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