South-Western College Publishing - Economics  
SUVs may become less likely to crack when they roll over
Topic Economic Analysis; Government and the Economy
Subject increasing government regulation of SUV safety
Key Words SUV, safety, roof-strength, regulation
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Reference ID: A135196826

News Story Government regulators suggest increasing roof strength standards on SUVs that were formerly considered smaller, family style vehicles and requiring them to meet the same roof strength standards as larger SUVs must meet. Now, vehicles that weigh 6,000 lbs. must meet the same standards as those that weigh up to 10,000 pounds.

SUVs have always been susceptible to rollovers because of their high centers of gravity in accidents, increasing the risk of injury and death from head injury and other severe trauma induced from rollovers. The proposed increase in roof strength standards is the culmination of a campaign by the National Highway Traffic Safety Administration to reduce the incidence of injury and death in traffic accidents. In 2004, over 10,000 people died from rollover crashes, up slightly from 2003. While rollovers account for only 3% of crashes, they account for over 1/3 of highway deaths--hence the campaign by the NHTSA.

The new regulations stipulate that an automobile roof must be able to withstand direct pressure equal to 2.5 times the vehicle's weight, up from the current 1.5 times the vehicle's weight. It will cost the auto industry approximately $90 million per year, and will save between 11 to 44 lives each year. Traffic safety advocates argue that the regulation isn't going far enough: Not enough lives are being saved, and additional regulation would save many more. A spokesman for General Motors indicated the same, saying, "There'll be no issue there for us" with the regulation as it stands now. It is likely, thought, that auto makers would balk at further regulation, arguing that more regulation would be too costly.

The new regulation will make vehicles heavier, reducing fuel economy and thus making it more difficult for auto companies to comply with increasing fuel (MPG) standards for SUVs.

1. What is the opportunity cost associated with increasing SUV roof strength, allowing them to withstand more direct pressure, as indicated in the summary?
2. Based on comments made by the traffic safety advocates and members of the auto industry, is this new regulation equating marginal benefits of new regulation with marginal costs? Why or why not? Where does the new regulation lie on a graph of marginal benefits and marginal costs?
3. Another study done by a University of California economist indicated that an accident between a car and SUV results in 4 times greater risk of death for occupants of the car. Will this new regulation make this externality better or worse? Why?
Source Laura Meckler, "Proposed roof-strength rules to cover big SUVs for first time." The Wall Street Journal Online, 17 August 2005. A1.

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