Wednesday, 3 December 2014

Phillip Hughes and safety at work

The death of Australian cricketer Phillip Hughes shocked everyone. It serves as a powerful reminder that safety at work, whether it be the sport's field or a gold mine, is not something that should be left to the discretion of individual workers. This point has been most powerful made in recent years by Robert Frank whose argument rests on the notion of positional externalities.
             To illustrate the point consider the game below where two cricketers have to independently decide whether to wear a helmet. The best joint outcome is for them to both wear a helmet (and get a payoff of 10 each). There is, however, an advantage - this is the positional externality - from not wearing a helmet when the other cricketer does (and get 12 to his 0). The advantage comes from increased performance or, in economic speak, from increased productivity and the consequent higher wage. This incentivizes neither player to wear a helmet. Which is a bad outcome for everyone.
            Instead of 'wear helmet' we could write 'use a safety rope when tree cutting', 'wear a respirator in the gold mine', 'work in a dangerous factory', 'drive the lorry when tired' etc. The crucial point is we end up with a race to the bottom, a race to minimal safety. That gold miners choose to work without a respirator is not evidence that this is what they want. It merely shows that in a competitive world where 'someone else will do the job' incentives drive miners to accept low safety. Individual workers are not able to stop such a race to minimal safety, only rules and regulations can do so.
           Phillip Hughes was wearing a helmet. The simple story above still, though, applies. We could surely produce helmets that would virtually eliminate the risk of death. It is just that without regulation no cricketer would ever choose to wear such a helmet. There will always be an incentive to wear a lighter, more agile, and less safe helmet. Over time, cricket has increased regulations, requiring the use of helmets for under 18s and restricting use of bouncers, but it still takes a relatively hands off approach to safety. Could it do more?
          This is a difficult question. Whenever there is tragedy there is a call for action and this brings with it the possibility of overreacting because of things like hindsight bias. It would, for example, be a false legacy if rules and regulations are put in place that primarily result in less children playing cricket. It is a case of weighing up costs and benefits. I do not think, however, this is as difficult as some suggest. The insight we get from positional externalities is of a general bias towards less than optimal safety. The insight we get from hindsight bias is of a bias towards ad-hoc regulation that does nothing to improve safety. The important thing, therefore, is to keep in mind what the rules and regulations are supposed to achieve. And that requires an understanding of positional externalities.    

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