MARKETPLACE September 16, 2003 Tuesday

MARKETPLACE September 16, 2003 Tuesday

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Marketplace (6:30 PM ET) - SYND

September 16, 2003 Tuesday

Professors Ian Ayres and Barry Nalebuff debate pros and cons of black boxes for automobiles

DAVID BROWN, anchor:

You know, we all want to be in the driver’s seat when it comes to safety. So how about a black box in the family car? You’ve heard about black boxes on airplanes that record flight data. Well, some commercial fleets and ambulances install them, too. Well, now a company called Road Safety has rolled out a black box for under $300. You plug in the device, then you wait for the mean beep it delivers when you’re not driving safely. So a waste of dollars or good sense? We asked our numbers guys, Add & Pad to duke it out. They’re two Yale professors, Ian Ayres and Barry Nalebuff.

Professor IAN AYRES (Yale Law School): Black boxes in cars? Maybe ambulances. When they crash they kill a lot of people. But in 100 million passenger cars? Totally unworkable. We already know why most accidents occur.

Professor BARRY NALEBUFF (Yale School of Management): Actually we don’t. Skid marks–unreliable. The Ford Explorer rollovers–still a mystery.

Prof. AYRES: We still don’t need it. Look, most accidents are caused by driver error, not by rollovers.

Prof. NALEBUFF: Key thing about these new black boxes is that they actually change people’s behavior. They beep.

Prof. AYRES: Nice theory. You know, I saw this Stallone movie where he ended up using the car’s warnings as toilet paper. A buzzer is never going to change how people drive.

Prof. NALEBUFF: You’re wrong. It turns out that Sunstar Ambulance put these black boxes in and cut accidents by 95 percent. It seems their drivers were more scared of getting caught than they were of getting killed.

Prof. AYRES: Oh, great. You know, one more intrusion into my privacy. Now everybody’s going to know how much I speed and whether I go out late at night.

Prof. NALEBUFF: Yeah, but, look, at least it doesn’t say where you went. And people should have a right to waive privacy in order to get cheaper insurance. You know, there’s no privacy rights for kids.

Prof. AYRES: Well, you got me. As a parent I’d pay 300 bucks, even if I didn’t get an insurance discount, to know how my kids were driving.

Prof. NALEBUFF: Yeah. It’s my car, my insurance. I want to know what’s going on when the car’s moving.

Prof. AYRES: Actually I’m more worried about what’s happening when the car’s parked. You got me.

Prof. NALEBUFF: The biggest mystery is why GM and other carmakers aren’t already providing this product. It turns out that existing chips in anti-lock brakes and air bags have all this information.

Prof. AYRES: You mean all GM would have to do is provide a way for parents and insurance companies to download information that exists be…

Prof. NALEBUFF: Absolutely. And, you know, it’s amazing, there’s very little GM can do to reduce the cost of its cars, but they can reduce the cost of driving. Cheaper insurance, safer cars, that would give them a competitive edge in the market.

Prof. AYRES: This is starting to sound like an idea that could save a lot of lives and be good business.

Prof. NALEBUFF: Absolutely. In New Haven, this is Barry Nalebuff…

Prof. AYRES: …and Ian Ayres for MARKETPLACE.

BROWN: Barry Nalebuff teaches at the Yale School of Management. Ian Ayres teaches at Yale Law School.