On small cars, safety and externalities

News that small cars are more dangerous has been everywhere since the Insurance Institute for Highway Safety issued a report that said:

That crash dummies in all three models tested — the Honda Fit, the Toyota Yaris and the Smart Fortwo — fared poorly in the collisions. By contrast, the midsize models into which they crashed fared well or acceptably… The institute concludes that while driving smaller and lighter cars saves fuel, downsizing and down-weighting is also associated with an increase in deaths on the highway.

That should hardly be a surprise. Bigger cars have more momentum and thus hit harder. What is interesting is the point Tim Lambert makes about externalities.

But whether a minicar is safer or not depends on your perspective. It’s more dangerous for the occupants, but it’s safer for the people in the bigger car… Of course, this benefit goes to other road users, so this suggests that there should be a tax break for minicars to encourage people to use them instead of bigger, more dangerous cars.

Or in other words, people who drive small cars create positive externalities for others, while drivers of larger cars create negative externalities.  This may help explain the trend towards ever larger cars (at least while gas was cheap). The real question is what (if anything) should be done about it? Are tax breaks, like Lambert suggests, the way to go?

4 thoughts on “On small cars, safety and externalities

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  1. Yes they are, but using the same argument as I did in my post one could argue that small car drivers impose externalities on bicyclists. In fact we can take it one step further and argue that bicyclists impose externalities on pedestrians.

    No one said there was an easy solution to this issue.

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