In the 2004 AEI-Brookings Joint Center Distinguished Lecture, Professor Sam Peltzman of the University of Chicago explains how regulations frequently fall short of their goals--or even make matters worse then they would have been--because of offsetting personal or market behavior. Drawing on examples from auto safety, employment, environmental, and pharmaceutical regulation to illustrate what has come to be known as the "Peltzman Effect," he also explores why many counterproductive regulations remain in place while others are repealed. Building on the work of Adam Smith, he constructs an insightful theory that helps to explain the persistence of the regulatory state.