The 55 mph speed limit was initially imposed as part of the Emergency Highway Conservation Act of 1973. This law has been amended in many states by raising the limit on certain highways.
Research suggested at the time of passage that the reduced speed limit could be credited with saving 7,466 lives per year, reducing fuel use by 3.4 billion gallons of gasoline per year, and reducing injuries by 198,000 per year. The same researchers estimated that drivers spent 3,997 million additional hours on the highway each year as a result of the lower speed limit.
At the time the speed limit was enacted, the price of gasoline was $0.53 per gallon, the average hourly wage rate was $7.50, and the average highway injury cost was $15,504.
a. If the average life saved were valued at $2 million would a cost-benefit analysis conclude that the 55 mph speed limit was admissible in 1973? Why or why not?
b. Many things have changed since 1973. Find current values and identify your source for each of the following: average price of gasoline, average hourly wage rate, average highway injury cost.
c. Increased automobile safety features and fuel efficiency have roughly offset the increase in the number of vehicles since 1973 so assuming the figures found by researchers in paragraph 2 are still valid, what would a life have to be valued at to make the speed limit admissible today?
d. Do you think the 55 mph speed limit should be reinstated? Why or why not?