A new paper in the Journal of Political Economy by Aaron Edlin and Pinar Karaca-Mandic looks at the harm other drivers are causing you (in terms of higher insurance premiums). Here is the abstract: 

We estimate auto accident externalities (more specifically insurance externalities) using panel data on state-average insurance premiums and loss costs. Externalities appear to be substantial in traffic-dense states: in California, for example, we find that the increase in traffic density from a typical additional driver increases total statewide insurance costs of other drivers by $1,725–$3,239 per year, depending on the model. High–traffic density states have large economically and statistically significant externalities in all specifications we check. In contrast, the accident externality per driver in low-traffic states appears quite small. On balance, accident externalities are so large that a correcting Pigouvian tax could raise $66 billion annually in California alone, more than all existing California state taxes during our study period, and over $220 billion per year nationally.

Those are some big numbers! The nice introduction provides more context:

Consider two vehicles that crash as one drives through a red light and the other a green light. Assume that the accident would not occur if either driver took the subway instead of driving: hence, strictly speaking, both cause the accident in full, even though only one is negligent. The average accident cost of the two people’s driving is the damages to two vehicles (2D) divided by the driving of two vehicles (i.e., D per driven vehicle). But the marginal cost exceeds this. In fact, the marginal cost of driving either vehicle is the damage to two vehicles (2D per driven vehicle)—fully twice the average cost. Surprisingly, this observation holds just as much for the nonnegligent driver as for the negligent one.

Drivers pay the average cost of accidents (on average, anyway), not the marginal cost, so this example suggests that there is a substantial accident externality to driving, an externality that the tort system is not designed to address. The tort system is designed to allocate the damages from an accident among the involved drivers according to a judgment of their fault.

A damage allocation system can provide adequate incentives for careful driving, but it will not provide people with adequate incentives at the margin of deciding how much to drive or whether to become a driver (Vickrey 1968; Green 1976; Shavell 1980; Cooter and Ulen 1988). Indeed, contributory negligence, comparative negligence, and no-fault systems all suffer this inadequacy because they are all simply different rules for dividing the cost of accidents among involved drivers and their insurers. Yet in many cases, from the vantage of causation, as distinct from negligence, economic fault will sum to more than 100 percent. Whenever it does, efficient driving incentives require that the drivers in a given accident should in aggregate be made to bear more than the total cost of the accident, with the balance going to a third party such as the government.

Does this theory of an accident externality from driving hold up in practice? Equivalently, as a new driver takes to the road, does she increase the accident risk to others as well as assuming risk herself? If so, then a 1 percent increase in aggregate driving increases aggregate accident costs by more than 1 percent. Such a positive connection between traffic density and accident risk will seem intuitive to anyone who finds herself concentrating more on a crowded highway and arriving home tired and stressed. Yet, such a relationship need not hold in principle. The riskiness of driving could decrease as aggregate driving increases because increased driving could worsen congestion; and if people are forced to drive at lower speeds, accidents could become less severe or less frequent. Consequently, a 1 percent increase in driving could increase aggregate accident costs by less than 1 percent and could even decrease those costs.

It seems to me that this only adds to the desire for road pricing and, in particular, congestion pricing that I have advocated before (click here).