Loftstedt – Chapter 3, benefits don’t come cheap

Yesterday, I happened to be in the Stoke-on-Trent area, hoping to cut across the A50 to pass by Loughborough on my way back down South. The A50 was unfortunately closed, the radio lady said, due to a diesel fuel spill. The ‘road ahead closed’ signs confirmed this but offered little advice as to an alternative. I occasionally use a Sat Nav but this insisted that I keep returning to the blocked route in some voyeuristic tendency.

The point is, accidents are costly. The costs go way beyond the immediate accident and can be difficult to predict or estimate with any certainty (yes, there are models for this sort of thing on a macroscopic scale, but the impact on each individual is more variable). In my case, it was easy to see the effects spread out like tendrils as people searched for alternative routes, causing severe delays elsewhere.

Lofty reminds us, in chapter 3 that regulations also have a cost. In negative terms, this is often referred to as a burden on business – all the time and effort spent in even trying to understand what is required, let alone misinterpreting it and even over-complying with; for example, ridiculously detailed quantified risk assessments for obvious risks with obvious, established, simple solutions. There have been attempts to estimate this financially and it is always a large figure; in boy-racer terms, it’s at least several hundred Bugatti Veyrons or several billion beer tokens. It seems too, that most of the costs are associated with a small number of demanding regulations (isn’t this always the case?); echoes of the Pareto principal. These regulations seem obsessively bureaucratic and administrative.

Overall though, the cost of accidents can dwarf the cost of compliance with related regulation. In other words, compliance with regulation avoids those accidents. Now, of course, not all regulation is effective or has a proven ‘protective link’. Indeed it is quite difficult to prove such a link categorically. Nonetheless, there is a “generally accepted” (that means no-one knows for sure) negative correlation between them i.e. that regulation reduces accidents or at least it is a significant factor. Clearly there are many factors at play, including the insurance industry and changes within our industrial profile over the years. The reduced accident rate also negatively correlates with the increased interest in bungee jumping and cosmetic surgery, demonstrating that only beautiful people should take risks.

Complying with regulations designed to avoid said accidents then means that you may not be entirely convinced that such accidents would ever have happened anyway (remember there is a certain underlying randomness about accidents – a few seconds earlier and it might have been a near miss that you might not even have noticed).

Prof Loftstedt again reminds us that one of the main problems in practice is misapplication (over-compliance). This is the ‘bonkers conkers’ movement, where over-restrictive rules have been created and health and safety blamed. The real reasons may not even be health and safety-related, but health and safety is conveniently hated and ridiculed already, so a little more will not hurt.

We’ll look at some of these in the next blog.