Academic journal article Economic Inquiry

Resource Allocation in Public Policy: The Effects of the 65-MPH Speed Limit

Academic journal article Economic Inquiry

Resource Allocation in Public Policy: The Effects of the 65-MPH Speed Limit

Article excerpt


Previous work (Lave [1985]) shows that highway fatality rates are strongly related to the variation in speed between cars. Variance kills. What matters most in setting a speed limit is choosing one that people will obey, hence reducing variance between cars.

This paper looks at another consideration for setting a speed limit. How will the limit affect the allocation of vehicles across alternative roads, and the allocation of policing resources across alternative safety activities? This resource allocation perspective leads to the development of a new criterion for judging safety effects. Instead of measuring the local effect of a speed limit change, we should measure the statewide effect because a reallocation of traffic and patrol activities will have systemwide consequences.

This perspective is analogous to the study of offsetting behavior pioneered by Peltzman [1975]. A government's attempt to improve the safety characteristics of a product may be offset by behavioral changes in the use of the product, thus substantially weakening the expected safety improvement, and possibly even making the overall situation worse.(1) If this has occurred, then we should be able to detect an increase in safety when the government regulation is reversed.

In 1987, the federal government allowed states to raise speed limits on their rural interstate highways; 40 states did so. Some reports show that fatalities increased (Baum et al. [1990], National Highway Traffic Safety Administration [1989], Gallagher et al. [1989]). However they only look at local effects: fatalities on a particular highway before and after the speed limit change. This is not the relevant criterion.


Raising the speed limit might have consequences for the allocation of policing resources and the allocation of traffic. Consider the policing resources first.

The Allocation of Policing Resources

There is strong evidence that the state highway patrols felt they had been forced to misallocate their manpower because of the federally mandated 55-mph national maximum speed limit. The federal government had imposed detailed compliance requirements that required strict new enforcement efforts.(2) In response, highway patrols shifted resources from other safety activities e.g., drunk driving checkpoints and truck safety, to speed enforcement on the interstate highways. These highways have the densest concentration of high speed traffic, hence a patrol-hour of activity there will control the greatest number of potential speeders. By 1983, 29% of patrol hours were devoted to rural interstate highways, though these were already the safest highways and produced only 9% of fatalities (National Research Council [1984, 227]).

The state highway patrols were well aware that this was a peculiar way to allocate manpower. Testifying before Congress, the International Association of Chiefs of Police said: "(Federal financial sanctions) force the over-concentration of limited resources for the express purpose of attaining compliance rather than application of resources in a manner most effectively enhancing total highway safety" (Tippet [1990]). And following the speed limit increase to 65-mph, they took the opportunity to reallocate patrol resources.(3)

The Allocation of Highway Resources

For physical reasons, the interstates are our safest roads. Higher legal speeds on the interstates would be expected to lure traffic away from other roads, hence reducing fatalities on the less safe roads. Is there evidence that traffic did shift to the interstates following the speed limit increase? We need to measure change relative to some expected baseline. Table I does this in two different ways.

Part A concentrates on the states that increased speed limits to 65-mph. For these states, it compares the growth of vehicle-miles traveled (VMT) on specific highway types to the overall VMT growth rate in the state. …

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