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Airbus and Public Safety - Choices

Since 1997, at least 3 million vehicles have been recalled due to air bag related problems. Of these, roughly half were due to problems of the sort that only time and road experience are likely to reveal.

Automobile air bags were originally designed as supplemental safety devices to be used along with a combination shoulder- and lap-seat belt. For twenty years the auto manufacturers argued that, after looking at the costs, passengers were better off with just seat belts. The activists hissed with contempt at this assertion ignoring the industry's voluntary installation of the collapsible steering wheel, the padded dash, and the high-penetration windshield. They, maintaining that the auto companies were not interested in selling safety, insisted on a federal mandate. They got it in Standard 208 which required the installation of air bags to protect an unbelted, 170-pound man in a head on collision (my emphasis).

Seat belt usage went from 10 percent in the early 1970s to 70 percent in the 1990s. What group was the most likely nonuser of seat belts? Teenagers and young adults, that's who.

There is a small problem with airbags - they are dashboard-mounted bombs that kill children and small adults in accidents they would otherwise walk away from. As Ward's Auto World, an industry bible once put it, "For the sake of protecting Beavis and Butt-Head, we have put infants, young children, and small adult women at risk."

To a large extent, the problem is caused by the precautionary principle that is typically applied to R & D and commercial products that can actually increase risk. This principle focuses solely on the possibility that new technologies can pose extreme or unmanageable risks, even after considerable testing has occurred. The fact is that while new technologies introduce new risks, most offer net benefits. Most advocates of precautionary regulation are more anti-business and anti-technology than they are pro-safety.

Sources: Holman W. Jenkins, Jr., "Cigarettes and Air Bags: Won't the Do-Gooders Ever Learn?" The Wall Street Journal, June 10, 1997, p. A19; Sam Kazman, "Air bag-Related Recalls Demonstrate the Need for Real-World Testing As a Prerequisite for Any Air Bag Mandate Whatsoever," www.cei.org, February 7, 2000; and Henry I. Miller and Gregory Conko, "Are We Too Safe for Our Own Good: Radical Environmental Groups Have Prevailed upon Governments to Assail and Intimidate Industry," Los Angeles Times, June 1, 2001.

ANSWER THE QUESTIONS BELOW IN 210 WORDS ( total for the 5 questions, not each question)

1. What kind of goods would an economist call air bags?

2. According to the article, is this a failure of the market or a failure of government?

3. Is this an example of a price ceiling or a price floor?

4. If you were drawing a supply and demand graph of this market, would either of the curves move, and if so which one?

5. Should air bags be outlawed

Solution Preview

1. What kind of goods would an economist call air bags?

A merit good. This might be a common type of good, but one that is often not dealt with in economics. Merit goods are good that are considered to be needed or beneficial by a society (or government) but for which there is no demand and there is no ability or willingness to pay for it. They are considered beneficial because they cause externalities (or avoid negative externalities) or to remedy the short-sightedness of the population. In this case, it is the later, the justification is that people are not assessing the long term risks of not using them. One could also claim that in countries with universal healthcare, the externality is the cost of society of caring for an injured individual.

2. According to the article, is this a failure of the market or a failure of ...

Solution Summary

Solution to:

Since 1997, at least 3 million vehicles have been recalled due to air bag related problems. Of these, roughly half were due to problems of the sort that only time and road experience are likely to reveal.

Automobile air bags were originally designed as supplemental safety devices to be used along with a combination shoulder- and lap-seat belt. For twenty years the auto manufacturers argued that, after looking at the costs, passengers were better off with just seat belts. The activists hissed with contempt at this assertion ignoring the industry's voluntary installation of the collapsible steering wheel, the padded dash, and the high-penetration windshield. They, maintaining that the auto companies were not interested in selling safety, insisted on a federal mandate. They got it in Standard 208 which required the installation of air bags to protect an unbelted, 170-pound man in a head on collision (my emphasis).

Seat belt usage went from 10 percent in the early 1970s to 70 percent in the 1990s. What group was the most likely nonuser of seat belts? Teenagers and young adults, that's who.

There is a small problem with airbags - they are dashboard-mounted bombs that kill children and small adults in accidents they would otherwise walk away from. As Ward's Auto World, an industry bible once put it, "For the sake of protecting Beavis and Butt-Head, we have put infants, young children, and small adult women at risk."

To a large extent, the problem is caused by the precautionary principle that is typically applied to R & D and commercial products that can actually increase risk. This principle focuses solely on the possibility that new technologies can pose extreme or unmanageable risks, even after considerable testing has occurred. The fact is that while new technologies introduce new risks, most offer net benefits. Most advocates of precautionary regulation are more anti-business and anti-technology than they are pro-safety.

Sources: Holman W. Jenkins, Jr., "Cigarettes and Air Bags: Won't the Do-Gooders Ever Learn?" The Wall Street Journal, June 10, 1997, p. A19; Sam Kazman, "Air bag-Related Recalls Demonstrate the Need for Real-World Testing As a Prerequisite for Any Air Bag Mandate Whatsoever," www.cei.org, February 7, 2000; and Henry I. Miller and Gregory Conko, "Are We Too Safe for Our Own Good: Radical Environmental Groups Have Prevailed upon Governments to Assail and Intimidate Industry," Los Angeles Times, June 1, 2001.

ANSWER THE QUESTIONS BELOW IN 210 WORDS ( total for the 5 questions, not each question)

1. What kind of goods would an economist call air bags?

2. According to the article, is this a failure of the market or a failure of government?

3. Is this an example of a price ceiling or a price floor?

4. If you were drawing a supply and demand graph of this market, would either of the curves move, and if so which one?

5. Should air bags be outlawed

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