The Cost of Auto Accidents

Auto fatalities dropped in 2010 below 33,000, less than in any year since 1949. But AAA has just published an alarming report arguing that the cost of auto crashes is $300 billion a year. Since Americans spend only about $900 billion per year (select table 2.5.5 and add lines 54, 57, and 116) buying, operating, and maintaing cars, this makes accidents appear to be a significant portion of the cost of driving.

AAA’s worthwhile goal is to promote auto safety, but the report also feeds anti-auto arguments about the hidden costs of driving. Since auto critics also misuse AAA’s estimates of the cost of driving, it is worth reviewing this new report.

The most important thing to note is that more than two-thirds of the $300 billion cost is the fatalities themselves. Cambridge Systematics, which wrote the report, says that the cost of each fatality is $6 million. Since there were 33,800 fatalities in 2009, the year Cambridge Systematics used in its analysis, the total cost of fatalities is $203 billion. The report cites this DOT paper as the source of the $6 million figure. The paper cites other estimates of the “cost of a statistical death” as being between $2.6 million and $8.5 million. The average is $5.8 million, which adjusted for inflation to 2009 dollars is about $6 million.

Without being callous about the value of a human life, there is a different between out-of-pocket costs and the cost of a statistical death. Some people might be shocked to learn that the government thinks that their life is worth only $6 million. But most people would be hard pressed to come up with $6 million if they had to do so to save their lives. While it is analytically appropriate to use a number like this to evaluate the cost-effectiveness of various safety measures, this is not the same as saying each death costs this much money.
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In fact, most motorists are insured and insurance pays at least some of the costs of injuries and fatalities. Insurance costs, as listed on line 116 of BEA’s table 2.5.5, are only about $60 billion or about 7 percent of the total cost of driving in 2009. There is a major discrepancy between this $60 billion and Cambridge Systematics’ $300 billion.

The Antiplanner suspects that the goal was to come up with an alarmingly large number so that the costs of accidents would appear to be greater than the costs of congestion, allowing AAA to promote auto safety legislation. However, the Cambridge Systematics report not only overestimates the cost of accidents, it underestimates the cost of congestion. It cites Texas Transportation Institute data on congestion costs, but TTI only measures the costs to commuters. Delivery companies and other businesses also suffer from congestion, and those costs are roughly equal to the costs to commuters. If we double congestion costs and reduce the cost of accidents to about $100 billion (the costs of insurance plus a fudge factor for uninsured accidents and people whose full costs were not covered by insurance), then congestion costs are almost double the costs of accidents.

This isn’t to say that auto safety is unimportant. But auto fatalities and injuries are declining dramatically, while congestion costs were rapidly increasing until the recession began. Assuming the recession will eventually end, it is likely that congestion costs will then begin to climb again, while accident and fatality rates have declined during both economic booms and recessions. A new safety law may be focusing on the wrong problem.

It is also worth noting that the rural roads have higher fatality rates than urban roads, and local and collector roads have higher fatality rates than freeways. The lowest rates are on urban interstate freeways–less than 5 fatalities per billion passenger miles compared with more than 30 on local rural roads–so building new highways to interstate standards can both relieve congestion and improve safety. That 5 per billion is about half the fatality rate from light rail and commuter rail and about equal to heavy rail (subways and elevateds) and buses. Since most people live in urban areas, they may not realize that the real highway safety issues are rural.

Auto safety is important. But it is also important to be clear on what we are talking about. AAA could have used the $6 million figure to do a cost-effectiveness analysis comparing various safety and congestion relief measures. Instead, it chose to use it to create a false alarm about the costs of driving. That’s a disappointment, especially considering that AAA should be on the side of auto users.

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About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

12 Responses to The Cost of Auto Accidents

  1. Dan says:

    The Antiplanner suspects that the goal was to come up with an alarmingly large number so that the costs of accidents would appear to be greater than the costs of congestion, allowing AAA to promote auto safety legislation.

    Homo sapiens: creatures of habit. You’re doing it again, Randal.

    DS

  2. FrancisKing says:

    Antiplanner – “While it is analytically appropriate to use a number like this to evaluate the cost-effectiveness of various safety measures, this is not the same as saying each death costs this much money.”

    The cost of each fatality is a basket of costs, in particular what the person would have contributed financially over their lives, the costs of medical treatment and so on. Insurance only pays out for immediate costs. So, AAA have got it right, and Antiplanner has got it wrong.

    One of the best investments is transport safety. It has rates of return that Wall Street bankers would kill for.

    $6m per fatality, incidentally, is almost exactly twice the £2m per fatality figure used in the UK.

    Antiplanner – “It is also worth noting that the rural roads have higher fatality rates than urban roads”

    This is true. Many rural roads which once carried low traffic flows are now carrying much higher flows, through development and also overspill from congested arterial roads. Junctions on these rural roads are unsafe (particularly crossroads) and there is often no central median.

    Antiplanner’s freeway suggestion is an expensive one. Adding a narrow median to an existing road, and improving selected junctions, is a more cost-effective solution.

  3. C. P. Zilliacus says:

    The Antiplanner wrote:

    The Antiplanner suspects that the goal was to come up with an alarmingly large number so that the costs of accidents would appear to be greater than the costs of congestion, allowing AAA to promote auto safety legislation.

    Highway congestion relief usually also means a safer highway system.

    But in considering congestion and crashes, also consider the impact that fatal and injury wrecks have on the highway network. A fatal freeway crash like this one on U.S. 50 (John Hanson Highway) in Prince George’s County, Md. (not all of U.S. 50 is a freeway, but all of it in Maryland is at least four-lane divided, and much of it is an expressway or freeway) usually closes the freeway in at least one direction for an extended time as the crash is investigated and reconstructed by law enforcement.

  4. C. P. Zilliacus says:

    The Antiplanner also wrote:

    The lowest rates are on urban interstate freeways–less than 5 fatalities per billion passenger miles compared with more than 30 on local rural roads–so building new highways to interstate standards can both relieve congestion and improve safety.

    The above is an extremely important fact that is usually ignored when debating the addition of new capacity to an urban or suburban freeway network.

  5. Dan says:

    The above is an extremely important fact that is usually ignored when debating the addition of new capacity to an urban or suburban freeway network.

    Two extremely important questions: what are the urban average speeds compared to the high-fatality stretches, and what is the cost of Eminent Domain and fair market value of land adjacent to urban freeways?

    DS

  6. Andrew says:

    Try as much as you like, there is no way to to make this pig smell like a rose.

    Its unacceptable that over 1 of every 100 Americans will die in a preventable auto accident.

    And quiblling over the value of human life is just the sort of callous disgusting behavior we’ve come to associate with bean counters who refuse to make safety improvements because the cost benefit ratio is not there if you stick some pittance of a value on human life.

    The right question is not whether you could come up with $6 million to save your life, but what amount of money paid to your family would induce you to prematurely part with your life.

    The carnage on the roads is unacceptable, especially the heavy annual toll in loss of life of young drivers who must be buried by their parents.

  7. C. P. Zilliacus says:

    Dan wrote:

    Two extremely important questions: what are the urban average speeds compared to the high-fatality stretches, and what is the cost of Eminent Domain and fair market value of land adjacent to urban freeways?

    Average speed is not as important (in my opinion) as the variability of speeds, for variability of speed (and intersection conflicts) are frequently the culprit in crashes.

    As for cost of purchasing right-of-way, I don’t really think that’s all that important, for it’s a very long-term investment, especially for new toll roads where customers (and not payers of highway taxes) will pay the cost of operations and maintenance.

  8. the highwayman says:

    Though CPZ, you, O’Toole, Cox, Karlock & Rubin are frauds. There isn’t a need for lobbyists to defend the continued existence of the street in front of my house!

  9. Sandy Teal says:

    Deaths from commercial airline crashes in the US:

    2007: 0
    2008: 0
    2009: 50
    2010: 0
    2011: 0

  10. FrancisKing says:

    Andrew wrote:

    “And quiblling over the value of human life is just the sort of callous disgusting behavior we’ve come to associate with bean counters who refuse to make safety improvements because the cost benefit ratio is not there if you stick some pittance of a value on human life.”

    But in fact the rate of return on safety programs pretty much guarantees that safety measures will pass the cost-benefit test.

  11. Dan says:

    Average speed is not as important (in my opinion) as the variability of speeds, for variability of speed (and intersection conflicts) are frequently the culprit in crashes.

    Yes, and speed kills. I’d wager the less-congested and higher-speeded stretches on intersection-free highways are the reason for the higher fatality numbers. And I agree with your variability point, as does CDOT, which is driving pace cars up and down I-70 during ski season this year to lower congestion delays. Test run recently worked well.

    As for cost of purchasing right-of-way, I don’t really think that’s all that important, for it’s a very long-term investment,

    Yes, and widening an existing freeway in urban areas is expensive up front (why there is a bottleneck on 5 in downtown Seattle, for instance). We can’t complain about up-front costs of denigrated modes without mentioning costs in this mode.

    DS

  12. C. P. Zilliacus says:

    Dan wrote:

    Yes, and speed kills.

    Does it? Speed above what is “reasonable and prudent” as they signs used to read on certain Montana freeways does, but in general, variability of speed is much worse than high speed.

    I’d wager the less-congested and higher-speeded stretches on intersection-free highways are the reason for the higher fatality numbers. And I agree with your variability point, as does CDOT, which is driving pace cars up and down I-70 during ski season this year to lower congestion delays. Test run recently worked well.

    I saw that mentioned on Vanderbilt’s blog, and they are forcing traffic to operate at a uniform and less-variable rate of speed. As I understand it, that section of I-70 is four lanes (two each way) and has a fair amount of steep grades. Part of the Maryland section of I-70 is similar between Hagerstown and Frederick, even though our mountains are not nearly as high as those in Colorado. But the eastbound descent from the crest of the Blue Ridge (a/k/a South Mountain) is a steep and two-lane winding affair, and vehicles going too fast or too slow (especially at the end of a holiday weekend) have caused more than one (serious) wreck over the years, even though the speed limit is only 65 MPH. Part of the problem (in my opinion) is that we have a fair number of drivers on that section of I-70 that are used to driving on the relatively flat freeways of the East Coast and are not accustomed to a steep freeway descent, and the “freak out” factor will sometimes take over in the form of (unneeded and dangerous) application of the brakes.

    Our small state has a much “meaner” descent (that’s almost Rocky Mountains in scale) in the western part of the state on I-68, also eastbound. That one starts at the crest of Savage Mountain (near the Eastern Continental Divide) near Finzel, Maryland and descends to a very substandard freeway segment (with an extremely sharp curve) at the bottom of the grade in Cumberland, near the Potomac River. But it has three things going for it: (1) It’s very well-signed; (2) the speed limit for trucks and all vehicles is low; and (3) even though it’s an Interstate, the traffic volumes are relatively low.

    Yes, and widening an existing freeway in urban areas is expensive up front (why there is a bottleneck on 5 in downtown Seattle, for instance). We can’t complain about up-front costs of denigrated modes without mentioning costs in this mode.

    Agreed. That’s why road capacity (and especially new capacity added to the system) should be priced. Even if the motor fuel tax were indexed to inflation (and I am not sure that will every happen), I think scarce highway capacity needs to be priced to send the right signals to users of the highway, though imposing tolls on highways that are currently “free” is difficult in political terms.

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