# Sam Peltzman

# Sam Peltzman

Sam Peltzman (born January 24, 1940) is an economist and the Ralph and Dorothy Keller Distinguished Service Professor Emeritus of Economics at the University of Chicago Booth School of Business. He received a bachelor of business administration from the City College of [New York](/organizations/new-york) in 1960 and a Ph.D. in economics from the University of Chicago in 1965. Before joining the Chicago business faculty in 1973, he taught at the University of California, Los Angeles and served as a senior staff economist for the President's Council of Economic Advisers.

His published work examines the boundary between the public sector and the private economy: government regulation, industrial organization, the growth of government, the political economy of public education, and the choices of voters and legislators. "Toward a More General Theory of Regulation," issued as a National Bureau of Economic Research working paper in April 1976 and published the same year in the Journal of Law and Economics (volume 19, number 2, pages 211–240), formalizes a point George Stigler had left largely undeveloped. Because politics has diminishing returns both to the size of a favored group and to the size of the transfer, the costs of using the political process limit not only who dominates regulation but also how large that group's gains can be, with consequences for entry and for the prices and output that regulation produces.

"The Effects of Automobile Safety Regulation" (*Journal of Political Economy*, August 1975, pages 677–725) is the paper later writers cite for what they call the Peltzman effect. Peltzman has described the result as follows: the first U.S. auto-safety rules, adopted under the 1966 National Traffic and Motor Vehicle Safety Act and requiring seat belts and other equipment, were followed by more accidents, but those crashes were less harmful, so that the net number of driver fatalities in his estimates did not fall. A 2023 National Bureau of Economic Research reassessment defines the effect as risk-compensating behavior—driving faster, choosing more dangerous routes, or driving in worse conditions because a belt makes a crash less costly to the occupant—and, replicating Cohen and Einav (2003), finds little support for a rise in deaths among pedestrians and other non-occupants. The same paper reports that primary seat-belt laws are associated with a 5 to 9 percent reduction in fatalities among motor-vehicle occupants. Peltzman has called the 1975 study primitive by later standards, has said that critics argue over the size of the offset rather than over whether some behavioral response exists, and has rejected the reading that he opposes wearing a belt. In 1973 the *Journal of Political Economy* published his evaluation of the 1962 Drug Amendments. Those amendments to the Federal Food, Drug, and Cosmetic Act are the point at which the Food and Drug Administration moved drug approval toward well-controlled evidence of effectiveness; before them, the agency has noted, many marketed drugs were ineffective for their labeled uses.

He is an editor of the *Journal of Law and Economics* and director emeritus of Chicago's George J. Stigler Center for the Study of the Economy and the State, which he led from 1991 to 2005. He sits on the Council of Academic Advisers of the [American Enterprise Institute](/organizations/american-enterprise-institute). The university awarded him a Quantrell Award for undergraduate teaching in 1981 and, in 2026, the Norman Maclean Faculty Award for contribution to teaching and student life. In September 2013 Thomson Reuters named him and [Richard Posner](/people/richard-posner) Citation Laureates in economics for extending theories of regulation, a forecast based on citation counts rather than an award he received. His books include *Political Participation and Government Regulation* and, edited with Clifford Winston, *The Deregulation of Network Industries: What's Next?*

## Early life and education

### Brooklyn and City College

Sam Peltzman was born on January 24, 1940. A 1976 profile in *Reason* stated that he was born in Brooklyn. In a 2014 interview he said that one could “draw a 100 mile circle around Brooklyn” and that he had never left it until, at 20, he got off the train in downtown Chicago—his first time anywhere else. That arrival, in the fall of 1960, was the start of graduate study at the University of Chicago.

His undergraduate degree was from the City College of New York. The *University of Chicago Chronicle* recorded a B.B.A., magna cum laude, from City College in 1960. A 1972 *Reason* profile described the degree as a B.B.A. in economics.

### Graduate study and the dissertation

At Chicago he was a [Ford Foundation](/organizations/ford-foundation) fellow in the Department of Economics and worked on the *New Individualist Review*, a student quarterly whose editorial advisers included [Milton Friedman](/people/milton-friedman). The Summer 1962 issue identified him as a City College graduate, a Ford Foundation fellow, and the review’s new business manager, and carried his review “Housing in Latin America, Public and Private,” of Alan Carnoy’s *Democracia—Si!*, on regulation and a weak mortgage market as barriers to private housing in Latin America.

In the Spring 1963 issue, “CAB: Freedom from Competition” examined the [Civil Aeronautics Board](/organizations/civil-aeronautics-board). He wrote that the 1938 Civil Aeronautics Act, which the industry had sought, gave the board power over routes, entry certificates, fares, subsidies, and mergers, with automatic certificates for carriers already flying. He argued that the board cut nonscheduled airlines from 150 in 1947 to 50 by 1957 and limited price competition, acting “in great measure to protect the airlines at the expense of the public interest” and as “a focal point for the organization of a compulsory cartel.” A 1972 *Reason* profile stated that, as a Chicago student, he was business manager and associate editor of the review.

His dissertation, written as a Ph.D. student of George Stigler, concerned [Federal Deposit Insurance Corporation](/organizations/federal-deposit-insurance-corporation) coverage and entry into commercial banking. He later wrote that a new bank effectively needed a grant of insurance and that his results showed insurance had substantially reduced entry. Stigler, he recalled, called the draft “fine for preliminary work” and told him to “come back in another six months with the right answer”; Peltzman “never could get the right answer,” and Stigler “eventually relented.”

The research appeared as “Entry in Commercial Banking” in the *Journal of Law and Economics* 8 (October 1965): 11–50. A companion piece, “Bank Entry Regulation: Its Impact and Purpose,” in the December 1965 *National Banking Review*, thanked Stigler, Friedman, and Lester Telser for criticism and advice. Peltzman argued that competition between state and national chartering authorities had kept entry close to free banking until the Banking Act of 1935, which required federal certification of capital, earnings prospects, and community “convenience and needs” before a bank could obtain deposit insurance or related federal status. Using annual data for 1921–62, he estimated that the post-1935 regime lowered the entry rate by 0.579 percentage points a year, nearly the 0.605 percent average for 1936–62, and concluded that the Act had cut entry by a third to a half.

He left Chicago in 1964 to teach economics at the University of California, Los Angeles. The Chicago Ph.D. was awarded in 1965, and the *National Banking Review* identified him that December as an assistant professor at UCLA.

## Academic and government career

### UCLA and the Council of Economic Advisers

Peltzman taught economics at the University of California, Los Angeles after completing a Ph.D. in economics at the University of Chicago in 1965. The National Bureau of Economic Research appointed him a research fellow for 1966–67 while he was on the UCLA faculty; those fellowships were ordinarily limited to Ph.D. holders already at the rank of assistant or associate professor. A 1985 biographical note from Chicago’s Graduate School of Business says he spent nine years at UCLA, one of them as a visiting associate professor of business economics at Chicago. Interviewed in 1972, when he was an associate professor of economics at UCLA, he dated that visit to 1968–69. During the UCLA years he and UCLA professor J. Fred Weston co-edited *Public Policy Toward Mergers*, published by Goodyear in 1969.

In 1970 Paul W. McCracken, chairman of the Council of Economic Advisers, asked him to spend a year on the council staff, a leave he later dated from August 13, 1970, to August 13, 1971. The council’s report on 1970 lists him as a senior staff economist for industry problems, regulation, and the environment. Its report on 1971 lists him, with a UCLA affiliation, among the senior staff economists who resigned that year; the professional staff, drawn mainly from universities and research institutions, normally served one or two years. A later university account also places the appointment in 1970–71.

The assignment, as he described it, was advice on markets touched directly by government policy, not monetary or fiscal policy. He worked most closely with council member Hendrik S. Houthakker, whose 1970 responsibilities included transportation, industrial organization and antitrust, and environmental problems, and he also dealt with member Herbert Stein and with McCracken. Most of his time went to surface-freight regulation, including the [Interstate Commerce Commission](/organizations/interstate-commerce-commission), and to pollution policy, including the United States [Environmental Protection Agency](/organizations/environmental-protection-agency). He joined an interagency group, chaired by Houthakker, that drafted proposals to rely more on competition in trucking, railroads, and barges; he said the council’s side had favored a wider relaxation of entry and rate controls than the proposal that advanced. He left on August 13, 1971, before the administration’s wage and price controls.

### The Booth faculty and teaching

In 1973 the Graduate School of Business appointed him a Ford Foundation Visiting Research Professor; the school’s 1985 note, which calls him professor of business economics, dates the regular faculty appointment from 1974. The *University of Chicago Chronicle* in 2001, and a 2026 university announcement, date his faculty service from 1973 at the school now called the Booth School of Business.

In 2001 the university named him the Ralph and Dorothy Keller Distinguished Service Professor of Economics; he had held the Sears, Roebuck Professorship of Economics. Dennis Keller (M.B.A. 1968), founder of DeVry Institute and Keller Graduate School of Management, had established the chair in 1997 in memory of his parents, and it was first awarded to Gary Eppen. Peltzman holds the Keller title as emeritus.

In 1981 he received a Llewellyn John and Harriet Manchester Quantrell Award for Excellence in Undergraduate Teaching, together with Mark Inghram, Chi-Ch’ao Chao, and Ronald A. Thisted. The university traces the Quantrell awards to a 1938 endowment for annual prizes, based on student nominations, and describes the award as believed to be the oldest American prize for undergraduate teaching. On April 15, 2026, University of Chicago News announced that he would receive that year’s Norman Maclean Faculty Award for his contribution to teaching and student life. Established in 1997 and given by the Alumni Association and Alumni Board, the award is named for Norman Maclean, author of *A River Runs Through It*, who taught at Chicago for 40 years. The 2026 honorees were to be recognized during Alumni Weekend, April 30 to May 3.

## The economic theory of regulation

### From producer capture to a political equilibrium

In "The Theory of Economic Regulation" (1971), George Stigler treated regulation as a market in which political actors supply coercive power and private interests demand transfers of wealth. His central thesis was that, "as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit." Compact groups outbid diffuse consumers, he argued, because a large per capita stake overcomes the rational ignorance described by [Anthony Downs](/people/anthony-downs) and the free-rider problem stressed by Mancur Olson, while diminishing returns to group size and to the size of the transfer limit how far the winners can go. In the same issue of the *Bell Journal*, Richard Posner argued that cross-subsidies were too common for pure producer protection to explain.

Peltzman formalized that argument and then dropped its single-winner premise in "Toward a More General Theory of Regulation," circulated in April 1976 as National Bureau of Economic Research Working Paper 133 and published that August in the Journal of Law and Economics (vol. 19, no. 2, pp. 211–240). He presented it on 17 January 1976 at a University of Chicago conference on the economics of politics and regulation held for Stigler's sixty-fifth birthday; the journal issue collected the conference papers. The stated motive was a dissatisfaction with some of Stigler's conclusions that Stigler shared: agencies would not serve only one economic interest.

In the single-winner setup, the regulator maximizes net support: votes from a group of size *n*, increasing with the per capita gain at a diminishing rate, minus opposition that rises at an increasing rate with the tax, after the cost of organizing the winners. The losers are taxed by less than a revenue-maximizing broker for the winners would tax them, so a government-organized cartel yields less than a private cartel could. If taxes need not be uniform, some buyers can be subsidized and some producers taxed, and the constituency is no longer one economic interest.

For price and entry, support is maximized as a function of price and producer wealth, subject to demand and cost. Equilibrium price lies between the competitive and monopoly prices, because the marginal political return to profit is set equal to the marginal political cost of a higher price; pure regulatory capture is a corner, not the usual case. Less elastic demand or supply still moves price toward the cartel level and makes regulation more likely. Two further results are distinct from producer capture. Politically similar buyers induce compressed price differences, so high-cost customers pay less relative to marginal cost than low-cost customers, a systematic cross-subsidy. And regulation buffers shocks: a cost or demand change that would only reallocate rents under competition induces a price change that restores the politically preferred division of those rents.

[Gary Becker](/people/gary-becker)'s 1983 model of competition among pressure groups, anticipated in his comment on the 1976 paper, puts the balance among the groups. Rising marginal deadweight loss makes larger transfers meet mounting resistance, which favors less wasteful redistribution and helps explain why many competitive industries stay unregulated.

### Deregulation and later restatements

By the late 1980s the literature was commonly called the economic theory of regulation, Posner's 1974 label. In "The Economic Theory of Regulation after a Decade of Deregulation," in the 1989 [Brookings Institution](/organizations/brookings-institution) *Papers on Economic Activity: Microeconomics*, Peltzman asked whether repeal of long-standing entry and rate controls falsified it. He argued no: the theory did not time entry or exit, deregulation had been selective, and the coalitional version allowed exit once redistributed wealth eroded. Railroads, airlines, stock brokerage, and bank deposits roughly fit, after rents were dissipated by declining demand, service competition, institutional trading, or inflation and new substitutes. Trucking, where substantial rents remained, and long-distance telecommunications, opened before rents had substantially eroded, did not. Even in the fitting cases, the theory could not say why deregulation was chosen over tighter controls or subsidies, and "a full analysis of the scope and form of these institutions remains unwritten."

"George Stigler's Contribution to the Economic Analysis of Regulation" (*Journal of Political Economy*, October 1993) separated the 1971 capture result from what Peltzman thought had lasted. Against the early-1970s evidence, producer victory was an intelligible claim, but the 1976 model and Becker's 1983 paper had regulators serving a wider set of interests, and Stigler came to accept those generalizations. What endured was the framing itself: self-interested suppliers and demanders, costly political transactions, and a large role for organized groups, so that an efficiency rationale for regulation had to show what political actors gained.

The 2004 AEI-Brookings lecture *Regulation and the Natural Progress of Opulence* (published 2005) used a chapter title from [Adam Smith](/people/adam-smith) for the claim that market adaptation often offsets regulatory intent, while growing wealth can hide the costs. In Public Choice in 2022, Peltzman split Stigler's sentence. That industry pressure is what produces regulation is, he wrote, "honored mainly in the breach": industries more often defend an arrangement than acquire one. Once the status quo changes, including by deregulation the industry did not seek, that interest still weighs disproportionately in design and operation. What lasts, on this account, is the public-choice framing and its attention to organized interests, not undivided producer capture.

## Automobile safety and the Peltzman effect

### The 1966 standards and the 1975 estimates

The National Traffic and Motor Vehicle Safety Act of 1966, Public Law 89-563, enacted on September 9, 1966, stated a purpose of reducing traffic accidents and the deaths and injuries that result from them, and it authorized Federal motor vehicle safety standards: minimum performance rules that had to be practicable, meet the need for motor-vehicle safety, and be stated in objective terms. The statute gave that task to the Secretary of Commerce and required initial standards, drawn from standards already in existence, by January 31, 1967.

Commerce issued those standards on January 31, 1967 (published February 3). Apart from the seat-belt assembly standard, effective March 1, 1967, they took effect on January 1, 1968. For passenger cars they required belts at seating positions and an upper-torso restraint at specified front outboard seats, except in convertibles, with separate rules for belt hardware and anchorages. Steering systems had to absorb energy on impact and could shift no more than five inches rearward in a barrier crash of at least 30 miles per hour. An interior-impact standard limited deceleration against the instrument panel and seat backs and required energy-absorbing material on parts such as sun visors and armrests—the rules often called padded dashboards. Brakes had to be split so that failure of one pressure component would not eliminate braking, the rule commonly called dual braking, and windshield glazing had to meet a safety code aimed at reducing lacerations and ejection.

Peltzman, then on the University of Chicago business-school faculty, estimated the program’s effect in “The Effects of Automobile Safety Regulation,” published by the University of Chicago Press in the *Journal of Political Economy* 83, no. 4 (August 1975): 677–725. A shorter version appeared as *Regulation of Automobile Safety*, a 53-page American Enterprise Institute monograph with a 1975 imprint; his Booth publications list dates it to 1976. The article’s abstract says technological studies implied that annual highway deaths would be 20 percent greater without the mandated devices, but that those studies ignored safety buyers would have purchased anyway and the response of drivers once the devices lowered the harm from a crash. He concluded that the offsets were “virtually complete,” so regulation had not decreased highway deaths. Time-series data, unlike the cross-section, implied some saving of occupants’ lives at the expense of more pedestrian deaths and more nonfatal accidents, a pattern he read as consistent with drivers responding to the lower private cost of a crash. *Chicago Booth Review* later quoted the paper’s firmest line: “The one result of this study that can be put forward most confidently is that auto safety regulation has not affected the highway death rate.”

That was not a claim that a belt fails to protect its wearer in a given crash. In a 2016 interview he said the rules produced more accidents that were less harmful, leaving net driver fatalities unchanged once other factors were held constant. He rejected an anti-belt reading—“I never say you shouldn’t wear a seat belt”—and described the point as the incentive a mandate does not remove. He called the estimates primitive by later standards and said the dispute he saw was over magnitude, not over whether any offset exists. How complete the highway-death offset was has remained contested and is taken up under Reception and criticism.

### What the name came to cover

The name “Peltzman effect” later attached to that offset and is used as a label for risk compensation: people change their choices when they feel more protected, so a safety measure that lowers the private cost of risky activity need not deliver its full engineering benefit. A stricter relative is risk homeostasis, set out by Gerald J. S. Wilde in *Risk Analysis* in 1982: the accident rate depends on a target level of risk, so measures that leave the target unchanged are offset as behavior adjusts until perceived risk matches it again. Peltzman’s paper estimated one regulatory episode; Wilde’s claim is that the long-run rate stays anchored unless the target itself changes.

Peltzman later applied the same substitution to sudden changes in mortality risk, not only to vehicle design. “Offsetting Behavior, Medical Breakthroughs, and Breakdowns,” in the *Journal of Human Capital* 5, no. 3 (Fall 2011): 302–341, looks at antibiotics, new heart-disease treatments, and the AIDS epidemic. He argued that offsetting behavior could account for higher noninfectious-disease mortality in the groups that gained most from antibiotics, a link between heart-disease gains and increased obesity, and—in the other direction—lower external-cause mortality among vulnerable groups where AIDS incidence was high and one major risk had unexpectedly risen.

## Pharmaceutical regulation

### Efficacy review and new-drug introductions

The Drug Amendments of 1962, usually called the Kefauver–Harris Amendment, revised the Federal Food, Drug, and Cosmetic Act after Senator Estes Kefauver’s hearings on prices and effectiveness claims and after Food and Drug Administration reviewer Frances Oldham Kelsey kept thalidomide off the U.S. market. President John F. Kennedy signed the law on October 10, 1962. Firms had to prove safety and supply “substantial evidence” of effectiveness from adequate and well-controlled studies, and the FDA had to approve the application before marketing. The statute also required review of drugs already cleared only for safety. In 1966 the FDA contracted with the National Academy of Sciences and the National Research Council for that review of 1938–62 approvals; by 1984 final action covered 3,443 products, 2,225 judged effective and 1,051 not effective.

Peltzman, then at the University of California, Los Angeles, published “An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments,” *Journal of Political Economy* 81, no. 5 (September–October 1973): 1049–1091. A Booth bibliography has sometimes retitled it “An Evaluation of Consumer Protection Regulation.” From Paul de Haen counts, annual introductions of new chemical entities averaged 41.5 in 1951–62 and 16.1 in 1963–70. A demand equation estimated on 1948–62 introductions, using drug sales and physicians’ services, projected about 41 a year after 1962, and he attributed the entire shortfall to the amendments. As a check he used William Wardell’s U.S.–Britain comparison: the U.S. flow was 1.13 times the British flow in 1960–61 and 0.52 times it in 1966–71. He also wrote that real research cost per entity-equivalent appeared to have doubled, by an extra $5 million to $10 million, with payoff delayed at least two years.

Benefits and costs were measured with consumer surplus and then set against expert ratings, including those of the American Medical Association Council on Drugs. Because ineffective drugs lost sales as physicians and patients gained experience, he treated pre-1962 waste as small: one estimate put first-year “true” surplus on pre-amendment entities near $43 million and waste near $0.4 million. Table 5 capitalized the net loss at roughly $400 million a year if the benefit stream was perpetual ($491.0 million minus $82.4 million) and about $330 million if it lasted 15 years, in 1970 dollars—described in the article as the rough equivalent of a 5–10 percent tax on drug purchases. The American Enterprise Institute published the longer *Regulation of Pharmaceutical Innovation: The 1962 Amendments* in June 1974, with a second printing in April 1975. Its summary says the new-drug flow was more than halved and gestation more than doubled, and that the 1970 loss was $300 million to $400 million, about 7 percent of drug spending, with a net cost above 5 percent after a small price effect from less entry. Thomas McGuire, Richard Nelson, and Thomas Spavins contested the surplus accounting in a 1975 comment, and Peltzman replied in the same issue.

### Prescriptions, recalls, and subsequent evidence

“The Health Effects of Mandatory Prescriptions,” *Journal of Law and Economics* 30, no. 2 (October 1987): 207–238, asks whether requiring a physician’s authorization improved health. Prescription-only labeling had been federal law since the 1951 Durham–Humphrey Amendment. Setting aside origins and costs already studied by others, including Peter Temin, Peltzman used U.S. and international data. The paper reports little effect: prescription rules did not seem to enhance the life-saving benefits of modern drugs, and they did not reduce, and may have increased, life-threatening risks from improper use.

With Gregg Jarrell, “The Impact of Product Recalls on the Wealth of Sellers,” *Journal of Political Economy* 93, no. 3 (June 1985): 512–536, covers FDA drug recalls and automobile recalls, not drugs alone. Shareholders of recalling firms lost substantially more than the direct cost of repair or destruction; the authors read the excess as lost goodwill that reached the firm’s other products and, in the aggregate, competitors.

Later research has reopened the delay question without confirming the 1973 tax figure. Henry Grabowski, John Vernon, and Lacy Glenn Thomas compared the United States with Britain in the *Journal of Law and Economics* in 1978 so that the amendments could be separated from other changes in research opportunities. Casey Mulligan’s “Peltzman Revisited,” a 2021 working paper of the Becker Friedman Institute and the National Bureau of Economic Research, published in 2022 (65, no. S2: S355–S387), looks at easier generic-drug entry after the 2017 Generic Drug User Fee Amendments reauthorization and at accelerated vaccine approval in 2020. In his account, the generic change brought more entry and lower prices, and the cost in forgone innovation was more than offset by gains from competition, especially after 2016. Accelerated vaccine approval in 2020, he argues, had large net benefits, while a cost-benefit account of FDA delay is still incomplete if patients substitute treatments outside the agency’s jurisdiction before approval.

## Industrial organization and prices

### Concentration, utilities, and antitrust

In industrial organization, “Pricing in Public and Private Enterprises: Electric Utilities in the United States” (*Journal of Law and Economics*, 1971) compared publicly and privately owned electric utilities. Modeling public managers as trading profit for political support, he predicted lower government prices and prices less tied to the cost of each customer class; Charles Needy’s 1980 restatement reports that those two implications were strongly supported, while more uniform prices, less price discrimination, a narrower service mix, and smaller output were not clearly confirmed.

“The Gains and Losses from Industrial Concentration” (1977), also a National Bureau of Economic Research working paper, split the correlation of concentration and profitability into price and cost effects for 165 four-digit manufacturing industries, 1947–1967. Rising four-firm concentration was associated with lower unit costs, especially in growing industries; falling concentration had weaker cost effects. At the sample means, total factor productivity over 1947–1967 was 8.6 percent where concentration rose and 3.1 percent where it fell; with manufacturing productivity growing about 2 percent a year, he attributed roughly one-fifth of that growth, where concentration was rising, to the change in structure. Cost cuts dominated price increases, so he treated the profits correlation, as Harold Demsetz had urged, as mainly an efficiency result rather than collusion. Cutting four-firm ratios above one-half (about 0.7 in that group) to one-half was calculated to raise unit costs on the order of 20 percent and prices 10 to 15 percent, a social loss just over 13 cents per dollar of output. The concentrated sector in that calculation accounted for about one-fourth of manufacturing sales, or about $250 billion. Frederic M. Scherer commented in 1979 under the title “The Causes and Consequences of Rising Industrial Concentration”; Peltzman’s reply in the same issue is three pages.

“The Effects of FTC Advertising Regulation” (1981) is an event study of share prices around Federal Trade Commission cases on allegedly deceptive advertising. He called the losses in firm value surprising, because before civil-penalty authority in 1975 the usual remedy was a cease-and-desist order rather than a fine, and he doubted how far those orders constrained later conduct. A 1988 Bureau of Economics report read his evidence on 23 cases as consistent with deterrence and, in its own sample, found an average abnormal loss of about 2.5 percent of firm value over five days around investigation announcements in consent settlements.

“The Decline of Antitrust Enforcement” (*Review of Industrial Organization*, 2001) argued that easier merger policy and looser treatment of vertical restraints would last: skepticism of intervention had risen, harmful effects of the new policy were not evident, and traditional antitrust mattered less in global markets, though new technologies might revive price-fixing cases. A 2005 *Journal of Law and Economics* essay traced the shift to Aaron Director, whose arguments on predatory pricing, vertical restraints, and tied sales spread through Chicago school teaching rather than papers under his name.

### Asymmetric price adjustment

“Prices Rise Faster than They Fall” (*Journal of Political Economy*, 2000) measured asymmetric price transmission on monthly indexes for 77 consumer goods and 165 producer goods. In more than two of every three markets, and about as often for producer goods as for consumer goods, output prices responded faster to cost increases than to decreases; the immediate response to a cost increase was on average at least twice the response to an equal decrease, and the gap lasted at least five to eight months. One supermarket chain showed no asymmetry against its own wholesale costs, but asymmetry was larger when a shock passed through fragmented wholesale distribution, smaller when input prices were more volatile, and unrelated to proxies for inventories, menu costs, and imperfect competition—outside the reversible adjustment of standard price theory.

Later work both used and qualified the result. Meyer and von Cramon-Taubadel’s 2004 survey called asymmetry common in farm and food markets, including Peltzman’s, but warned that tests like his can reject symmetry too often. Bachmeier and Griffin found no wholesale-gasoline asymmetry in daily 1985–1998 prices under a standard error-correction model. Tappata’s 2009 search model showed the same pattern can arise among competitive sellers when consumers search more at high prices.

## Voting, the growth of government, and education

### Budgets, legislators, and the vote

"The Growth of Government" (Journal of Law and Economics 23, no. 2, October 1980, pp. 209–287) measured government's role by the size of its budget. Spending rose relative to output after about 1900, transfers outpaced government consumption, and the rise did not reverse after World War I. Wagner's law—public spending with an income elasticity above one—"remains to be enacted." A survey he cited put that elasticity near 0.75, and his own estimates, after relative prices, left the government share with an income elasticity near zero. Population growth and Peacock and Wiseman's war-and-bureaucracy ratchet also failed to explain the rise in transfers.

He substituted a redistributive politics. A coalition to tax some voters for others' benefit is easier, he argued, when incomes are more equal, beneficiaries share a recognizable interest, and taxes are cheaper to collect and convert into benefits. The result he highlighted is that greater equality of private incomes increases the demand for political redistribution. He read a broader, schooled middle class as a major source of rich-country budget growth, and a reason poorer countries had smaller states. A rising government-to-GNP ratio was not, on this view, inevitable.

"Constituent Interest and Congressional Voting" (Journal of Law and Economics 27, no. 1, April 1984, pp. 181–210) treated the principal–agent link as one in which legislators serve those who pay with votes and campaign funds. What he called "political ornithology"—stable ideological blocs—shrank once supporters' economic interests replaced average district traits. "An Economic Interpretation of the History of Congressional Voting in the Twentieth Century" (American Economic Review 75, no. 4, September 1985, pp. 656–675) extended the claim: twentieth-century changes in congressional voting "can be traced mainly to corresponding changes in the economic interests of their constituents." As regions converged in income, the price of a liberal vote changed enough, in his account, to move the North toward liberal voting and the South toward conservative voting, to split each party by region, and to shift Democratic strength from South to North.

"Economic Conditions and Gubernatorial Elections" (American Economic Review 77, no. 2, May 1987, pp. 293–297) found that national income growth, interacted with the governor's tie to the president's party, moved postwar gubernatorial votes, while state income growth did not. Unemployment added nothing once income growth was included, and budget growth relative to income had only a modest cost. "How Efficient Is the Voting Market?" (Journal of Law and Economics 33, no. 1, April 1990, pp. 27–63) asked whether that response was well informed. In the 1988 draft of presidential, Senate, and gubernatorial results, voters used at least three years of income and inflation news, penalized unexpected inflation and permanent income changes rather than expected inflation and transitory income changes, and weighted national income above local deviations. Extra spending was treated like lost private wealth regardless of whether it was deficit-financed, a political form of Ricardian equivalence. "Voters as Fiscal Conservatives" (Quarterly Journal of Economics 107, no. 2, May 1992, pp. 327–361) found the same pattern in presidential, senatorial, and gubernatorial elections from 1950 to 1988: defense and nondefense dollars cost the president's party equally, state welfare growth hurt governors disproportionately, and deficits did not register—leaving the question of why budgets had still grown.

### Public schools and the youth labor market

"The Political Economy of the Decline of American Public Education" (Journal of Law and Economics 36, no. 1, pt. 2, April 1993, pp. 331–370) linked the post-1960s fall in performance, only partly reversed after 1980, to school politics. College-entrance scores, taken by just under half of 17-year-olds, fell more from 1971–81 and 1981–89 where teacher unionization went furthest, part of that link appearing only in the 1980s, and where states first displaced local boards as funders. Desegregation pressure was not associated with lower scores. Pre-1980 declines were also larger where politically important industries hired more college-educated workers.

"Political Economy of Public Education: Non-College-Bound Students" (Journal of Law and Economics 39, no. 1, April 1996, pp. 73–120) reported the same two variables—teacher unions and state, rather than local, funding—associated with lower Armed Forces Qualifying Test performance from 1971 to 1991 for non-college-bound students, including the lower tail and Black students. Within-state comparisons pointed to state policy, not local operations, and he argued wider social change was not a plausible account.

With Kevin M. Murphy, "School Performance and the Youth Labor Market" (Journal of Labor Economics 22, no. 2, April 2004, pp. 299–328) estimated market correlates for young men leaving high school from about 1970 to the mid-1990s. A one-standard-deviation gain in relative state performance was associated with about 3 percent higher entry wages and, omitting the initial score level, a higher log-odds of college. Unlike school resources, performance also lined up with better jobs, and a one-standard-deviation relative decline with about 8 percent less state employment growth. Any fading of the wage effect with experience was weaker.

In comments in the same issue, David D. Friedman found that family background, including broken homes, can out-correlate the political variables and that some coefficients lose significance with those controls, though the broad pattern held. [Cass Sunstein](/people/cass-sunstein)'s "Against Interest-Group Theory" rejected that interest-group reading.

## Editorial work and institutions

### Journal editing

A biographical note published with a 1985 selected paper of the University of Chicago Graduate School of Business states that Peltzman was named editor of the *Journal of Political Economy* in 1974. He was still one of the editors in 1989. The University of Chicago Press index to volume 97, covering February through December of that year, lists the editors as [Robert E. Lucas Jr.](/people/robert-lucas-jr), Peltzman, Sherwin Rosen, José A. Scheinkman, George J. Stigler, and Robert M. Townsend, in cooperation with other members of the Department of Economics and the Graduate School of Business and with outside referees.

Chicago Booth and University of Chicago News describe Peltzman as an editor of the *Journal of Law and Economics*. The Booth biography uses the present tense for that role and adds that he serves on the editorial boards of several other academic journals.

### The Stigler Center, books, and policy institutes

Peltzman directed the George J. Stigler Center for the Study of the Economy and the State from 1991 to 2005 and is its director emeritus. The center, founded in 1977 and based at Booth, says it is dedicated to understanding issues at the intersection of politics and the economy. It supports that work through research funding, analysis of data and economic trends, courses, events, and related programs, including research on regulatory capture and on how special-interest groups subvert competition.

*Political Participation and Government Regulation* (University of Chicago Press, 1998) collects ten of his previously published articles with an original introduction. Part One, "Political Participation," reprints papers on congressional voting, gubernatorial elections, and voters. Part Two, "Government and Regulation," reprints papers on the theory of regulation, the growth of government, deregulation, and Stigler's contribution to the economic analysis of regulation.

With Gianluca Fiorentini of the Università degli Studi in Florence, he edited *The Economics of Organised Crime* (Cambridge University Press, 1996). The press presents the volume as an application of economic theory to the origins, internal organization, market behavior, and deterrence of organized crime.

With Clifford Winston he edited *Deregulation of Network Industries: What's Next?* (Brookings Institution Press and the American Enterprise Institute, 2000). The chapters, first given in December 1999 at a conference of the AEI–Brookings Joint Center for Regulatory Studies, discuss airlines, railroads, telecommunications, and electric power, then at different stages of regulatory reform. A concluding chapter takes up the continued influence of interest groups on regulatory agencies and on Congress.

Booth's faculty page states that Peltzman serves on AEI's Council of Academic Advisers. A 2014 listing on AEI's site included him and described the council, then chaired by George L. Priest of Yale Law School, as advising the institute's president on its research agenda, publications, and appointments, and as choosing each year's recipient of the [Irving Kristol](/people/irving-kristol) Award.

## Reception and criticism

### Influence in economics and policy debate

The regulation papers belong to the Chicago school of economics work associated with George Stigler and Richard Posner. Stigler had treated regulation as something organized groups seek. In "Toward a More General Theory of Regulation" (*Journal of Law and Economics*, 1976), Peltzman set out a version in which the costs of politics limit both the size of the favored group and its gains, with implications for prices and output. The 1975 automobile paper and the 1973 drug paper are the empirical applications that later work tests: offsetting driver behavior, and the net cost of slower drug introduction.

On 25 September 2013 the IP & Science business of [Thomson Reuters](/organizations/thomson-reuters) named Peltzman and Posner Citation Laureates "for their work extending economic theories of regulation." The label was a Web of Science citation forecast: the firm called those listed the researchers "most likely" to receive a Nobel Prize "either this year or in the future." It was not the [Sveriges Riksbank](/organizations/sveriges-riksbank) Prize in Economic Sciences in Memory of Alfred Nobel. The 2013 prize went to Eugene F. Fama, [Lars Peter Hansen](/people/lars-peter-hansen), and [Robert J. Shiller](/people/robert-j-shiller) for the empirical analysis of asset prices, and the 2024 and 2025 prizes went to other economists. Peltzman has not received the memorial prize. Google Scholar's profile listed about 35,095 citations and an h-index of 43, including about 9,914 to the 1976 article and about 2,328 to the 1975 safety article, the standard reference for tests of risk compensation. Casey Mulligan's later National Bureau of Economic Research paper treats the 1973 comparison as a framework in later research and in arguments about Food and Drug Administration review, not as a re-estimate of its cost figure.

### Empirical critiques

Dispute over the 1975 safety study concerns the size of any behavioral offset and net lives saved. Leon S. Robertson (*Journal of Economic Issues*, 1977) held that Peltzman's assumptions, model, and fatality series did not justify the claim that lower occupant deaths were canceled by higher deaths among pedestrians, motorcyclists, and bicyclists, and that omitted data showed the standards reducing fatalities. Peltzman replied in the same issue. H. C. Joksch's critique had appeared in *Accident Analysis & Prevention* in 1976. Robert W. Crandall and John D. Graham (*American Economic Review*, 1984) asked whether any offset was trivial or substantial, estimating crashworthiness rules such as seat belts, energy-absorbing columns, and padded dashboards under the Federal Motor Vehicle Safety Standards. Graham's car-vintage estimates implied roughly a 30 percent lower occupant death rate, read as minimal driver response; with Steven Garber he found a no-lives-saved result sensitive to specification and an alternative implying tens of thousands of lives saved in the 1970s.

Mandatory belt laws are a narrower test. Alma Cohen and Liran Einav (*Review of Economics and Statistics*, 2003) found that higher belt use cut traffic deaths by less than National Highway Traffic Safety Administration estimates, with no significant rise in nonoccupant fatalities. D. Mark Anderson, Yang Liang, and Joseph J. Sabia replicated that pattern and, in a 2023 NBER paper through 2019, associated primary-enforcement laws with about a 5 to 9 percent lower occupant fatality rate per vehicle-mile; secondary-law effects were smaller, and nonoccupant rates showed no clear offset. The disagreement is about magnitude: some offset rather than a near-complete one, with net lives saved.

On the 1962 Kefauver–Harris Amendment, objections concern the sample behind the drop in new chemical entities, what an unweighted count measures, and the value of keeping ineffective drugs off the market. Peltzman fit pre-1962 demand and assigned the entire post-1962 shortfall to the amendments. Henry Grabowski argued that omitting supply limits such as depleted research opportunities let that residual mix in other changes and bias consumer cost upward, and that an unweighted entity count does not by itself show therapeutic importance or how large the benefit was from excluding ineffective drugs. Thomas McGuire, Richard Nelson, and Thomas Spavins (*Journal of Political Economy*, 1975) objected that aggregate demand shifts need not show how physicians learn, because some may underuse an uncertain drug rather than overuse it. Grabowski, John M. Vernon, and Lacy Glenn Thomas (1978) treated fewer introductions and costlier development as little disputed and the causes as contested. Mulligan's later paper does not confirm the 1973 figure. Easier generic entry after 2017 can, in his estimates, benefit consumers by more than it discourages innovation, and faster 2020 vaccine approval had large net benefits, including substitution toward products outside FDA jurisdiction.

## Dated facts

_No published facts on this page yet._

## Methodology

https://factrail.ai/methodology

Canonical: https://factrail.ai/people/sam-peltzman