Life's cheaper in the faster state
Sydney Morning HeraldWednesday 14 January 2004
|This year's holiday road toll was the worst in eight years. But it's not because we drive badly. When asked, more than three-quarters of us say our driving is better than average.
It is true NSW recorded more deaths than Victoria over Christmas (25 compared with 17), but that needn't mean we are bad drivers, either. In the reassuring words of the pro-free market Centre for Independent Studies: "Victoria has always enjoyed slightly safer roads per kilometre travelled compared with NSW."
Most of us are very easily reassured that the deaths on our roads are not our fault. Six out of 10 of us admit to speeding (which is presumably OK because we are better than average drivers); six out of 10 of us oppose attempts to make the road rules tougher.
Late last year the CIS offered encouragement to speeders. On the front page of its magazine it asked: "Speed Traps: Saving Lives or Raising Revenue?" Inside it argued that speed had little to do with road deaths and that those of us who speed moderately "tend to be the safest drivers".
Since then the CIS appears to have softened its stand. The latest edition of its magazine devotes equal space to both sides of the debate.
So in that spirit I would like to take a look at what is actually happening in Victoria and whether it has any lessons for us here in NSW.
It is beyond doubt that there are far fewer road deaths south of the Murray: 334 last year compared with 553 in NSW. Victoria's population is lower, but not low enough to account for the difference.
It is also beyond doubt that Victoria enforces its speed rules more rigidly. In that state you will be booked if you are caught driving just 3kmh over the speed limit. In NSW we expect to be allowed to drive up to 10 per cent over the limit.
And in Victoria the speed cameras are hidden. Nineteen per cent of Victorian drivers say they have been booked in the last two years. In NSW the proportion is only 12 per cent. (The tough approach has become a political issue in Victoria. The Opposition has promised to reset the cameras to catch fewer speeders.)
The CIS is right to say that these facts do not necessarily mean that Victoria's approach has brought about the lower rate of deaths. There could be something else at work. To conclusively determine whether getting tough on speed saves lives you would need to run a controlled experiment in perhaps as many as 50 states which were free to vary their road rules over a period of years.
Fortunately the United States has conducted just such an experiment.
During the energy crisis of 1974 the Carter administration succeeded in enforcing a low nationwide US speed limit of just 55 miles per hour (88kmh). Road deaths slid 15 per cent.
From 1987 each state again became free to choose to lift the limit on its rural interstate roads. Within a year most states had lifted their limit to 65mph. But seven left the limit unchanged.
In a paper soon to be published in the Journal of Political Economy, the economists Orley Ashenfelter from Princeton University and Michael Greenstone from the University of Chicago examine what happened in those states that lifted their limits. Their findings are surprising.
First, the actual increase in speed in those states was quite low, an average of only 2mph (3.2kmh) on the roads affected. The professors say that is because a lot of drivers on those roads were already speeding.
Second, the small increase appears to have pushed up deaths per mile on those roads by an astounding 36 per cent.
So the professors asked a question only economists would ask: what benefit had the drivers in those states gained in exchange for each of the extra deaths?
The answer was reduced travel time - about 125,000 hours were saved for each extra life lost, which valued at the average wage rate, worked out at a benefit to drivers of about $US1.5 million ($1.9 million) per life lost.
Did the states that pushed up their speed limits value life too cheaply?
Perhaps not. That value of $US1.5 million per life is curiously close to the average $US1.8 million per life which is to be paid out in compensation to families of victims of the September 11 terrorist attacks.
Those US states that chose not to lift their speed limits valued lives more highly.
If speeding rules are indeed linked to deaths in the way that the US data suggests, then right now Victoria is valuing human life more highly than is NSW.
Those of us who enjoy the more relaxed approach to speeding law enforcement in this state are perhaps fortunate that no one has done the calculation for Australia.
Peter Martin, a former Treasury official, is the economics correspondent for SBS Television.