Risk Compensation
Peltzman Effect
A theory which suggests that people typically adjust their behavior in response to the perceived level of risk, becoming more careful where they sense greater risk and less careful if they feel more protected.
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Origin
University of Chicago economist Sam Peltzman gave the idea its most influential formulation in his 1975 paper "The Effects of Automobile Safety Regulation" in the Journal of Political Economy, arguing that mandatory seatbelts led drivers to take greater risks, offsetting safety gains. The resulting "Peltzman effect" became a touchstone of regulatory debate, though Canadian psychologist Gerald Wilde later expanded it into a broader risk homeostasis theory in 1982.
Updated February 22, 2026