Freakonomics in the Times Magazine: Not-So-Free Ride

Dubner and Levitt have written a column for the Times Magazine‘s inaugural “green” issue of Sun., April 20. The subject: how auto travel produces a variety of negative externalities — pollution, carbon emissions, congestion, accidents — and how one new strategy may be able to help: pay-as-you-drive (P.A.Y.D.) auto insurance.

The strange truth is that most auto insurance in the U.S. is bought on an all-you-can-eat basis, which means it’s costless to drive additional miles, at least from an insurance perspective. But P.A.Y.D. insurance would change that.

Here is some of the research that went into the column:

1. Various writings by the economist Aaron Edlin on P.A.Y.D. insurance, including:

• A 2006 paper from the Journal of Political Economy, co-authored by Pinar Karaca-Mandic, on the accident externality from driving.
• “Per-Mile Premiums for Auto Insurance,” a chapter from the 2003 book Economics for an Imperfect World: Essays in Honor of Joseph E. Stiglitz.
• A 2006 article from the Economists’ Voice called “If Voters Won’t Go for Taxing Oil to Conserve Energy, How Do We Do It?”

2. A draft paper on P.A.Y.D. insurance by Jason E. Bordoff and Pascal J. Noel of the Hamilton Project at the Brookings Institution, and an op-ed-style summary of the paper, written by Bordoff for the journal Democracy.

Also worth reading: a discussion of the Democracy piece from the Marginal Revolution blog.

3. U.S. auto statistics on accidents, miles driven, etc., from the Bureau of Transportation Statistics and the Fatality Analysis Reporting System, and a report on congestion costs from the Texas Transportation Institute.

4. An earlier blog post by Levitt, “Hurray for High Gas Prices!” that touched on the issue of mis-priced auto externalities.

5. Here’s the company that is about to roll out P.A.Y.D. insurance on a large scale.