Question

Using economics thinking and theory, write an essay on why drivers love to exceed the speed limits on the roads. (500 words)

Answer 1

People normally undertake those activities where expected reward is greater than expected cost. This would result in positive utility. Roads have a speed limit exceeding which can impose fines on the drivers. However, sticking to the speed limit means a driver will have to drive longer. Now if the driver perceives that the probability of her being caught speeding is not very large, thereby reducing the ‘expected’ fine she would be required to cough up if caught. Over-speeding shortens her travel time, which she can use for a more useful economic pursuit. Therefore, she has an incentive to over-speed.

The way around this problem for policymakers is to increase the fine, and improve the monitoring. However, this would increase the punishment for everyone by the same quantum and to the same level. The opportunity cost of driving slow, however is everyone’s private information. If this opportunity cost still remains high, compared to the expected fine, then the driver would continue to over-speed.