Safety (and environmental) regulations have no teeth unless the monitoring and enforcement effort is there:
After the Upper Big Branch Mine disaster killed 29 miners last year, federal coal-mine regulators launched a new program of safety blitzes, showing up unannounced at mines in Kentucky and other states, seizing telephones so people underground would get no warning, and fanning out in search of hazards.
Since April 2010, the federal Mine Safety and Health Administration has conducted 251 so-called “impact inspections” in coal mines, including 73 in Kentucky and seven in Indiana.
Those safety sweeps have netted 4,530 citations for violations, including nearly 2,000 in Kentucky and 111 in Indiana. At the same time, MSHA has ordered 427 temporary mine closings to fix problems, including 174 in Kentucky and six in Indiana.
In your regulatory model, attach a probability of getting caught with a violation variable and taking the derivative. You'll see that safe behavior is proportional to that probability.
Consider the graph at the right. The number of deaths in a "safe" year, defined as not 2006 or 2010 (recoding 2005 at 23 and giving 2011 an annual adjustment), is 26. The additional lives lost in an "unsafe" year is about 21.5. If we are valuing the lives saved at $6+ million, the extra monitoring and enforcement cost would need to rise by $129 million before the net benefits are negative.
