Policy analysis: Prescribing policies

DEMONSTRATION EXERCISE

Return to Chapter 1 and reread Case 1.1 (Saving Lives and Saving Time). Then read Case 5.1 (Opportunity Costs of Saving Lives—The 55 mph Speed Limit) below. Prepare a short analysis in which you answer these questions:

■ What assumptions govern estimates of the value of time lost driving? Are some assumptions more tenable than others? Why?

■ What is the best way to estimate the value of time? Justify your answer.

■ What is the best way to estimate the cost of a gallon of gasoline? Justify your answer.

■ Driving speeds and miles per gallon estimates may be based on official statistics on highway traffic from the Environmental Protection Agency and the Department of Energy or on engineering studies of the efficiency of gasoline engines. Which is the more reliable? Why? What are the consequences of using one source rather than another?

■ What is the value of a life saved? Explain.

■ Which policy is preferable, the 55 mph speed limit or the 65 mph limit that was abandoned in 1994?

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