Southern Economic Journal 2007, 74(1), 71-84 Automobile Safety Regulation and the Incentive to Drive Recklessly: Evidence from NASCAR Russell S. Sobel* and Todd M. Nesbitf When safety regulation makes automobiles safer, drivers may drive more recklessly, partially or completely offsetting effects on the overall level of safety. Evidence of these offsetting effects has been hard to find, however, primarily because of the aggregate nature of accident data. In this paper we explore how changes in the safety of automobiles used in the National Association for Stock Car Auto Racing (NASCAR) has altered the incentive of drivers to drive recklessly. This unique data set allows more accurate and objective measurement of the necessary variables to test for these effects at a microlevel. Our results strongly support the presence of these offsetting behavioral effects. JEL Classification: D01, H00, K00 1. Introduction Does automobile safety regulation (such as mandatory airbags) cause drivers to drive more recklessly? Economists have been fond of this idea since it was originally proposed by Peltzman (1975). Today this argument appears in almost every mainstream economics textbook and popular press book (e.g., Steven Landsburg's [1993] The Armchair Economist). However, for a theory so frequentlypresented as a basic insight of economics, the empirical evidence in its favor is rather unconvincing. In fact, the vast majority of empirical studies attempting to test for this "Peltzman effect" have rejected it in its entirety.1 Because of this, most economists largely discard the data and previous empirical studies and attempt to prove the argument logically. In verbal argument, for example, Armen Alchian and Gordon Tullock have made famous the hypothetical question of how drivers would react to the installation of large metal daggers protruding from steering wheels coupled with the removal of all restraint devices.2 In this paper we pose and test the question: How do drivers react to having cars so safe that they can generally walk away with no injuries when they crash it into a concrete wall or * Department of Economics, P.O. Box 6025, West Virginia University, Morgantown, WV 26506, USA; E-mail Russell.Sobel@mail.wvu.edu. t Sam and Irene Black School of Business, Penn State Erie, The Behrend College, 5101 Jordan Road, Erie, PA 16563, USA; E-mail tmnll@psu.edu; corresponding author. Received April 2005; accepted August 2006. 1 While Peltzman's (1975) original empirical tests yielded mixed results, the vast majority of follow-up studies have entirely rejected the empirical presence and significance of offsetting behavior; for examples, see Peltzman (1977), Robertson (1977), Orr (1982), Crandall and Graham (1984), Graham (1984), Graham and Garber (1984), Lund and O'Neill (1986), Evans and Graham (1991), Hoffer and Millner (1992), Chirinko and Harper (1993), Lund and Hazelbaker (1993), Peterson and Hoffer (1994), Risa (1994), and Loeb (1995). 2 The author of Herman Comics, Jim Unger, also depicted a similar idea in a newspaper comic. 71