In the 1960s, after some prodding from Ralph Nader, government regulators began a major push for safer cars. Which made University of Chicago economist Sam Peltzman wonder just how much safer these innovations made us. Specifically, he wondered about what economists call “moral hazard” — our tendency to take more risks when we’re insulated from the costs of that risk-taking.
In 1975, Peltzman published an article with an explosive conclusion: Less fearful of accidents, drivers were piloting their vehicles more recklessly, substantially reducing the lifesaving benefits of the regulation.
Economist Gordon Tullock suggested that if regulators really wanted people to drive more safely, they’d require automakers to mount a spike in the middle of each steering wheel, pointed toward the driver’s breast.
The “Peltzman Effect” doesn’t mean, however, that auto safety is useless. There’s still been a steady decline in deaths per 100 million miles of driving. In 1965, that number stood at 5.3. It is now 1.2.
But it seems there may be one area where the Peltzman Effect is large enough to completely erase the benefits of a safety measure: opiate use. A chemical called naloxone acts as an “opioid antagonist” — it reverses the drug’s effects on the body. It can thus save people who have overdosed.
As opioid usage has worsened, more and more jurisdictions have acted to increase access to naloxone. Not only first responders but also friends, family and even librarians have started to administer it. These state laws were passed at different times, giving researchers Jennifer Doleac and Anita Mukherjee a sort of a natural experiment: They could look at what happened to overdoses in areas that liberalized naloxone access and compare the trends there to places that hadn’t changed their laws.
Their results are grim, to say the least: “We find that broadening Naloxone access led to more opioid-related emergency room visits and more opioid-related theft, with no reduction in opioid-related mortality.”
You can never assume that the results of one study, however well done, are correct. But these results look pretty robust. If they hold up, they would mean that naloxone is not saving lives; all we’re doing is spending a lot of money on naloxone to generate some increase in crime.
It makes sense that the Peltzman Effect would show up strongly in drug users; after all, drugs hijack the brain’s reward system, redirecting it toward drug-seeking even at high personal risk. Drug users would be highly likely to recalibrate their risk-taking so that the risk of death remains constant, while the frequency and potency of drug use increases.
The coldly logical response to this would seem to be to discontinue naloxone use. But there’s something repulsive about that conclusion, and Doleac and Mukherjee can’t bring themselves to go there. “Our findings do not necessarily imply that we should stop making Naloxone available to individuals suffering from opioid addiction,” they write, “or those who are at risk of overdose. They do imply that the public health community should acknowledge and prepare for the behavioral effects we find here.”
So how can public policy prepare for those behavioral effects? Sally Satel, a psychiatrist who is also a drug policy scholar at the American Enterprise Institute, suggests we look at civil commitment for patients who overdose multiple times in a short period. But she also notes that civil commitment can’t work without good treatment options — and in a lot of places, those aren’t available.
Which brings us back to something that’s easy to forget about the Peltzman Effect: It can be used to argue as much for more regulation as for less. Insurance companies, after all, have been fighting moral hazard for centuries, which is why they reward people who install burglar alarms or fill in their swimming pools (or punish people who don’t do those things).
And so, too, can the government by using a combination of carrots and sticks to help addicts get clean. There are better policy responses to moral hazard than mounting a spike on the steering wheel — or depriving addicts of a second chance at life.