The Peltzman Effect in Covid era

Though experts had warned of the second wave last year itself, the sudden spike in Covid-19 cases in recent weeks across India and the rest of the world has caught both governments and people off guard.

While the reasons for the second wave are many, what is different this time is the decline in the usage of PPE kits, the reluctance of authorities to impose lockdowns, and avoiding sealing of houses or barricading areas reporting these cases.

What is noticeable is that states and hospitals are desperately seeking oxygen. Exponentially spiralling cases have exposed the fault lines in the health infrastructure. A huge number of these cases can be attributed to the vaccine rollout which has induced people to abandon safety measures like wearing of masks, maintaining social distancing and practicing personal hygiene.

When the vaccination drive started last month, people jubilantly posed for photos after getting the first jab and circulated it among their friends. Many felt they could discard all covid-appropriate behaviour from the very next day. Was this change due to the change in perception of the risk of contracting the virus?

In an article titled “Risk Compensation & Covid-19 vaccines “published in ACP (American College of Physicians) Journal on March 2, 2021, doctors Brit Trogen of Langone Health and A L Caplan of Langone Medical Centre, New York have highlighted this behavioural change among people to what is called as the Peltzman effect.

They refer to risk compensation theory which states that in situations that are perceived as risky, people naturally adjust their behaviour, compensating to minimise that risk.

To quote them, “from the start, those who perceived the novel coronavirus as threatening would in most cases, wear masks, wash their hands, and avoid large crowds. But the effects of risk compensation tend to fade over time as the novelty of a threat wears off and pandemic fatigue sets in. As the number of people vaccinated increases, this effect may also grow due to a misplaced sense of security in “herd immunity” long before widespread immunity is truly present."

Accidents and deaths

This phenomenon is named the “Peltzman Effect” after University of Chicago economist Sam Peltzman”. In the late 1960s, the US government made the wearing of seat belts mandatory in response to an increase in motor accidents and deaths. Peltzman wanted to find out whether the introduction of such measures and improved car safety technologies led to decreases in automobile death rates.

Sam Peltzman published his findings in his article titled “The Effects of Automobile Safety Regulation”, in the Journal of Political Economy in 1975. He found that there was no decrease in automobile death rates. Drivers felt safer with the new safety measures and responded by driving recklessly resulting in an increase in accidents. The very measures taken to protect drivers from the consequences of bad driving encouraged bad driving!

While the safety measures like airbags or seat belts or antilock brakes made the occupants safer it made the bystanders or non-occupants like pedestrians or bicyclists wearing helmets less safe because of the rash driving by the drivers. Peltzman effect explains that individuals are more likely to take greater risks when they feel protected.

Mere implementation of safety measures like vaccination may not produce the desired results. Safety measures should produce behavioural changes among people—changes that reduce risk and not increase it. For example, studies on safety measures found that drivers with antilock brakes changed their behaviour for the worse by driving faster and driving closer to the cars in front and braking harder than before.

Similar is the case with Indian laws that require two-wheeler riders to wear helmets while driving. The success of this law not only requires riders to comply with the law and wear helmets but also a change in their behaviour. Though two-wheeler users know that helmets protect them, most of them dislike helmets for various reasons and would drive recklessly if they were to wear helmets.

The Peltzman Effect is relevant today in understanding the impact and efficacy of vaccination drives. It can be used to study individuals who get a sense of security after being vaccinated may engage in riskier behaviour. They must be nudged to change their behaviour and encouraged to follow all safety measures. Achieving this may require a trade-off like not imposing a complete lockdown or allowing limited gatherings in weddings, malls, etc.

(The writer is a Chartered Financial Analyst and a former banker; he currently teaches at Manipal Academy of BFSI, Bengaluru)