7.04.2011

The Momentum Externality

I liked this new NBER working paper that was presented at the recent Stanford meeting.
Pounds that Kill: The External Costs of Vehicle Weight
Michael Anderson, Maximilian Auffhammer
NBER Working Paper No. 17170
Heavier vehicles are safer for their own occupants but more hazardous for the occupants of other vehicles. In this paper we estimate the increased probability of fatalities from being hit by a heavier vehicle in a collision. We show that, controlling for own-vehicle weight, being hit by a vehicle that is 1,000 pounds heavier results in a 47% increase in the baseline fatality probability. Estimation results further suggest that the fatality risk is even higher if the striking vehicle is a light truck (SUV, pickup truck, or minivan). We calculate that the value of the external risk generated by the gain in fleet weight since 1989 is approximately 27 cents per gallon of gasoline. We further calculate that the total fatality externality is roughly equivalent to a gas tax of \$1.08 per gallon. We consider two policy options for internalizing this external cost: a gas tax and an optimal weight varying mileage tax. Comparing these options, we find that the cost is similar for most vehicles.
And the important number from the intro (it was left out of the abstract):
When we translate this higher probability of a fatality into external costs (relative to a small baseline vehicle), the total external costs of vehicle weight from fatalities alone are estimated at \$93 billion per year
The focus of the paper's second half in on the design of policies that might correct this externality, which I really like because it makes the results instantly usable.

One thing that I think could enrich the paper further is if the authors discussed this result with a some attention to the physics of inelastic collisions.  One reason this might be useful is that it instantly points to a second policy option that is not addressed in the paper: changing speed limits.  In a collision, it's the momentum of the colliding cars that matters if we're thinking about the amount of kinetic energy that's available to kill the people in the cars.  As the paper rightly points out, momentum (and thus available kinetic energy) increases with vehicle mass.  But momentum is the product of mass and velocity.  So we could, in theory, maintain fatality rates while increasing average vehicle weight so long as we decreased speed limits.  The effect of vehicle speed on accident fatalities (via its influence on momentum) was shown in Ashenfelter and Greenstone's JPE paper.  I'm not sure if Americans would prefer to drive slower in bigger cars, but I think its worth pointing out that there is a tradeoff between mass and velocity (when one is talking about fatality risks).  These two papers are looking at two sides of the same coin: momentum.

4 comments:

1. There's another policy prescription. One could also change the material used to build cars or increase the extent of the "crumble" zone. Part of what makes a bike helmet effective is that it absorbs a large chunk of the impact, collapsing inward upon contact so that your head is protected. Cars do have that today, but I suspect it could be improved to lessen this externality. We could also build cars out of sponges.

2. How does risk homeostasis play into all of this?

3. I didn't know what "risk homeostasis" was, but if this is what you meant: http://en.wikipedia.org/wiki/Risk_homeostasis
Then I would say it might be something to think about in policy design. I don't love that model, I think it's a kind of simplistic way to think about how individuals cope with risk. But economic theory would predict that if individuals are more protected from some type of risk, they might be more willing to take on additional risks elsewhere. If the govt began taxing automobile mass, then perhaps drivers would drive faster. But we already punish people for driving too fast, so perhaps limiting mass would be effective.

4. "Heavier vehicles are safer for their own occupants but more hazardous for the occupants of other vehicles." That makes a lot of sense. That, it seems, is a reason why these vehicles are taxed more.