Risk compensation is a theory which suggests that people typically adjust their behavior in response to the perceived level of risk, becoming more careful where they sense greater risk and less careful if they feel more protected. Although usually small in comparison to the fundamental benefits of safety interventions, it may result in a lower net benefit than expected.
By way of example, it has been observed that motorists drove faster when wearing seatbelts and closer to the vehicle in front when the vehicles were fitted with anti-lock brakes. There is also evidence that the risk compensation phenomenon could explain the failure of condom distribution programs to reverse HIV prevalence and that condoms may foster disinhibition, with people engaging in risky sex both with and without condoms.
By contrast, shared space, is a highway design method which consciously aims to increase the level of perceived risk and uncertainty, thereby slowing traffic and reducing the number of and seriousness of injuries.
Risk compensation is related to the broader term behavioral adaptation which includes all behavior changes in response to safety measures, whether compensatory or not. However, since researchers are primarily interested in the compensatory or negative adaptive behavior the terms are sometimes used interchangeably.
The theory emerged from road safety research after it was observed that many interventions failed to achieve the expected level of benefits but has since found application in many other fields.
The reduction of predicted benefit from regulations that intend to increase safety is sometimes referred to as the Peltzman effect in recognition of Sam Peltzman, a professor of economics at the University of Chicago Booth School of Business, who published “The Effects of Automobile Safety Regulation” in the Journal of Political Economy in 1975 in which he controversially suggested that “offsets (due to risk compensation) are virtually complete, so that regulation has not decreased highway deaths”. According to Peltzman, regulation was at best useless, at worst counterproductive. Although Peltzman asserted that the level of risk compensation in response to highway safety regulations was complete, he did not claim that this was the case in all situations and the theory does not predict the magnitude of risk compensation in general.
The Peltzman effect can also result in a redistributing effect where the consequences of risky behaviour are increasingly felt by innocent parties (see moral hazard). By way of example, if a risk-tolerant driver responds to driver-safety interventions, such as compulsory seat belts, crumple zones, ABS etc. by driving faster with less attention, then this can result in increases in injuries and deaths to pedestrians.
Risk homeostasis is a controversial hypothesis, initially proposed in 1982 by Gerald J. S. Wilde, a professor at Queen’s University at Kingston, which suggests that people maximise their benefit by comparing the expected costs and benefits of safer and riskier behaviour and which introduced the idea of the target level of risk. He proposed four constituents to a persons calculations relating to risk:
- Expected benefits of risky behavior (e.g., gaining time by speeding, fighting boredom, increasing mobility)
- Expected costs of risky behavior (e.g., speeding tickets, car repairs, insurance surcharges)
- Expected benefits of safe behavior (e.g., insurance discounts for accident-free periods, enhancement of reputation of responsibility)
- Expected costs of safe behavior (e.g., using an uncomfortable seat belt, being called a coward by one’s peers, time loss)
Wilde noted that when Sweden changed from driving on the left to driving on the right in 1967, this was followed by a marked reduction in the traffic fatality rate for 18 months after which the trend returned to its previous values. He suggested that drivers had responded to increased perceived danger by taking more care, only to revert to previous habits as they became accustomed to the new regime.
In a Munich study, part of a fleet of taxicabs were equipped with anti-lock brakes (ABS), while the remainder had conventional brake systems. In other respects, the two types of cars were identical. The crash rates, studied over three years, were a little higher for the cabs with ABS, Wilde concluded that drivers of ABS-equipped cabs took more risks, assuming that ABS would take care of them; non-ABS drivers were said to drive more carefully since they could not rely on ABS in a dangerous situation.
The idea of risk homeostasis is disputed. One author claimed that it received “little support” another suggested that it “commands about as much credence as the flat earth hypothesis”, a third noted that the proposal did create considerable media attention: “What set the debate alight, rather like petrol on flames, was the proposition in 1982 that road users did not just adapt to perceptions of changing risk through compensatory behaviors, but that the process was a homeostatic one, producing overall equilibrium in safety-related outcomes”. Others claimed that road fatality statistics, which have fallen considerably since the introduction of safety measures, do not support the theory.