More cost-benefit on road safety

The debate on road safety has been lively, and has certainly helped me to sharpen my ideas on the subject. In particular, I’ve gone back to the most recent source of controversy, the proposal for banks of speed cameras on the Victorian section of the Hume Highway which would be able to check a driver’s average speed over sections of the Highway. The main effect would be to make it impossible to speed consistently (given fixed locations, the cameras don’t have much affect on such things as speeding up to overtake and so on).

This is a relatively straightforward case for cost-benefit analysis. People who formerly travelled at above the speed limit will go slower and take more time. On the other hand, since this will reduce both average speed and speed variance, there will be less accidents.

For the costs, I’ve assumed 15 000 cars per year, 20 per cent of whom speed consistently, maintaining an average of 130km/h (vs a limit of 110). I’ve given them a value of time saved of $20/hour (higher than is standard), and I estimate an annual cost of $10 million per year from enforcing the limit.

As already noted, the cost per life lost is above $20 million, between $5 million and $10 million so we only need to prevent one or two fatalities per year to get benefits>costs (there have been about 8 deaths per year in the last five years).

A slightly more involved calculation shows that the net externality generated by speeders and other dangerous drivers on the Hume is around half the total damage incurred from accidents (the actual cost incurred by safe drivers + the extra costs of defensive driving). On standard “pollution tax” arguments, the fine revenue that ought to be collected from the Hume, net of enforcement costs is therefore around $50 million per year.

This post has been updated to correct for an erroneous value-of-life calculation in the original version