Wednesday, December 16, 2009

The Pelzman Effect and Moral Hazard in Mountaineering

I caught the update on NPR on the search for three missing mountain climbers in Oregon this morning at about 6:50am while driving to work. I don't have any real comment on that search, as it is terrifying and sad to think of their fate.

However, the story had an add-on about a proposed policy: Republican John Lim has rallied around a group of Oregonians supporting mandatory radio beacons. The policy effects of such beacons are unclear, however. First, they might not be very effective. The current leader of the search effort says in the clip that no one is saying, "if only they had a radio beacon." Second, as the piece suggests, amateur climbers will feel safer about their odds of surviving the difficult climb, and be more likely to get into an accident. This is a specific type of moral hazard known as the Pelzman Effect. Essentially, more beacons may mean more total accidents, and, even if they rescue success rate improves marginally, more total accident deaths.

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