Peltzman Effect

What is the Peltzman effect?

The Peltzman effect, also called the offset hypothesis, is the hypothesis that people may change their behavior when safety improves, potentially offsetting part of the expected benefit. It is named for Peltzman’s 1975 analysis of automobile safety regulation.

The size and direction of behavioral change are empirical questions. McCarthy and Talley (1999) examine boating safety and distinguish behavior that offsets safety improvements from behavior that reinforces them.

Risk compensation does not mean that safety equipment is ineffective or that total risk must stay constant. A partial offset can coexist with an overall safety gain; the net result requires evidence for the specific measure and setting.

Peltzman effect example

Imagine a driver feeling safer after a vehicle upgrade and choosing to drive faster. If that behavior offsets some of the safety improvement, it illustrates the hypothesis. The example does not tell us whether the vehicle is safer overall; both the improvement and the behavioral change would need to be measured.