Economics of Transportation Safety

Transportation is characterized by high speeds and heavy mechanical equipment. Consequently, the risks of personal injury and property damage are considerable. Unlike other attributes of transportation such as price and service frequency, users have great difficulty in determining and interpreting safety risks. They also suffer from cognitive problems in taking appropriate actions to obtain the level of safety that they desire. Consequently, market forces result in more crashes than society prefers. Economists, psychologists, and engineers have been active in determining why users exercise less care than they should, and the market interventions that can change users’ incentives. These interventions include insurance, liability rules, information provision, and enforcing regulations on user conduct and the design of vehicles and infrastructure.