MORAL HAZARD AND PROTECTIVE GEAR

Craig Newmark has a post about Sam Peltzman’s work on mandatory seat belt laws and moral hazard. Actually, the post is about some snarkiness between Craig and Brad DeLong, but that is not my interest. My interest is in pointing out that the seatbelt phenomenon for which Sam Peltzman is known here — that mandatory seatbelt laws can and do, at the margin, induce less careful driving than in the absence of such laws — is not just restricted to seatbelt laws. (Heck, have ya seen the way Volvo drivers drive?)

Take my favorite example, from my favorite sport: hockey. When I was a wee lassie and we had season tix to the Penguins, the players soared around the ice with their locks flowing (this was the mid-70s, after all), and there were fights, and people got injured.

Then the NHL implemented a mandatory helmet rule for all entering players; existing players were grandfathered out of having to comply. Both my casual empiricism and statistics on penalty minutes and the increase in incidence of particular penalties (especially high sticking) suggest that the Peltzman effect was in full force: mandatory helmets seem, at the margin, to have contributed to an increase in violence in hockey, particularly the nasty, cheap crap that gives hockey such a bad name.

What this moral hazard problem has provoked in the NHL is not a reconsideration of the wisdom of mandatory helmet rules, far from it. It has led to two decades of inveighing against fighting, roughing, high sticking, checking from behind, all of the behaviors that increased after the helmet rule.

Without doing a thorough (and one hopes ept, as opposed to inept, job so as not to incur Brad DeLong’s wrath) econometric analysis it’s hard to determine causality from this observation of chronology. But it is suggestive.

Years ago my husband proposed a policy that could be incentive compatible and would induce the optimal level of violence in hockey:

If you injure another player and he misses games, you must sit out the same number of games, without pay.

So what do you think? Would that do it?

Under that policy, Mr. Mid-ice-check-from-behind Scott Stevens might miss half the season (unless he changed his play), which would be fine with me. I hate seeing his vile style of play rewarded.


5 thoughts on “MORAL HAZARD AND PROTECTIVE GEAR

  1. Here’s another moral hazard issue. Your interest is in hockey, mine is flying single-engine airplanes. There has been in development a new generation of small airplanes with truly advanced avionics, composite airframes, and state-of-the art safety features, the most notable of which is the ballistic recovery system (parachute). It’s supposed to work in such a manner that if a pilot inadvertently gets in to a pickle, he can deploy the parachute and–voila!–he and airplane float effortlessly and safely to the ground. The greatest example of this new airplane is the Cirrus, about which James Fallows wrote a book detailing its development with all these revolutionary features. (The book is called “free flight”.)
    Here’s the moral hazard part. The aviation community is simply stunned by the high accident rate these airplanes and their new owners have experienced, including a substantial number of fatalities. Presumably an economist familiar with the concept of “moral hazard” would not be. The FAA is supposedly looking into the phenomenon of high accident rates in the safe new airplane–it will be interesting to hear what they have to say.

  2. Would you, as a hockey fan (I’m not, especially) be happy with the reduced physicality of play induced by players concerned about being knocked out of action by a perfectly legal and reasonable hit?

  3. Hi Scott,

    Good question … in my case, I prefer the free-wheeling skating style as opposed to the rough-hitting style, so the reduced physicality is not a problem for me. For example, I tend to prefer the Czech style of play, with the emphasis on flow and passing. Actually, this is one reason why I absolutely adore watching Olympic women’s hockey — not just because I play hockey myself, but because the style of play involves more finesse and passing and strategy relative to the sheer physicality and strength that characterizes NHL play these days.

  4. Under this new incentive system, wouldn’t the following scenario be possible: Team A has a lowly bench warmer and Team B has a superstar. The bench warmer could injure the superstar on purpose and receive a suspension for X number of days, which wouldn’t hurt Team A, because they lose the bench warmer, but would hurt Team B because they lose the superstar. I realize the “without pay” clause may circumvent this scenario, but I wanted to throw this out there.

  5. The same thing can be seen in football. The helmets and shoulder pads are used as weapons to inflict damage to the opponent. You don’t see kids playing without pads on playgrounds launch themselves into their opponents the way pro and college players with protection do.

    It’s had deadly consequences too. A few years ago a Univ of Washington defensive back suffered a serious neck injury during a Pac 10 game. He died a year or so later from the injury.

    Also, Chris Auld of the U of Calgary recently published a piece in the Journal of Health Economics (vol 22, issue 3, May 2003. pp 361-377); “Choices, beliefs, and infectious disease dynamics”. One thing he found was that the announcement of a preventative vaccine can have, under some circumstances, the perverse result of increasing incidence of infection.

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