Economic evaluation of road safety measures - Swov

4. Government intervention in the market for mobility and
road safety
For a clear analysis of the role of government in relation to the incidence of
traffic accidents, we must first imagine the situation in which there is a
traffic system (comprising people, vehicle and road) without any form of
government intervention. This mental exercise becomes easier if we
concentrate on a traffic system in the Middle Ages.
A traffic system without government influence then proves imaginable for
the components people and vehicle, but not for the component of the road.
The construction and maintenance of the roads network is, next to the
maintenance of an army, one of the main raisons d'être of a government
organization. This is largely due to a combination of market imperfections: a
roads network is traditionally a public good, it has external benefits and its
construction involves large indivisible production units. Toll collection by
public authorities did exist but was restricted to a few, specific conditions.
For a long time, government intervention in the traffic system was indeed
confined to the road component. Everyone had a free choice in his mode of
transport, solely limited by his income. Vehicles were produced and sold
freely. There were few rules governing the use of the road, and there was
little attempt to enforce them. In the event of an accident whereby a third
party sustained any damage or injury, the guilty party would be tried on the
spot according to local rules of general criminal or civil law. He would be
sentenced to some appropriate punishment and/or required to pay
compensation to the victim.
This situation changed when road safety became a more important
consideration, largely as the result of the introduction of motorized vehicles.
People started to think about ways in which accidents could be prevented,
or at least to limit their harmful effects, and to settle the damage in a more
acceptable manner for the victims (faster, simpler, more complete). To an
extent, this led to changes which were market-led: car manufactures
developed safer vehicles, driving schools were established, insurers offered
policies which would cover both damage to one's own vehicle and harm of
third parties. The costs were met by the customers purchasing such goods
and services.
However, the market did not succeed in solving the road safety problem
accurately. In order to save money, at least in the short term, consumers
continued to buy unsafe vehicles, and to drive without proper instruction or
insurance. During the twentieth century, this situation prompted many
governments to take action - it should be remembered that governments
had by this time developed into large bureaucratic organizations with
considerable knowledge, financial resources and power -. One objective
was to educate and inform road users, to promote safer behaviour on the
road, and to encourage more consideration for the risk of damage or injury
when purchasing any of the (private) goods and services mentioned above.
Occasionally, a subsidy or tax concession would be created to make the
purchase of certain facilities financially even more attractive.
At the same time, more legislative measures were introduced to control
such aspects as the construction and maintenance of vehicles (these
measures being aimed at manufacturers and owners), and legal
requirements for conduct on the road, driving a vehicle (both in terms of
14 SWOV Publication D-2000-16E