Fix the Berl report on alcohol and drugs

The Costs of Harmful Alcohol and Other Drug Use report commissioned by the Ministry of Health and ACC has been the subject of some controversy. It was written by five authors from Business and Economic Research Limited (BERL), and they got support from a range of people, including 9 people from ACC or Ministry of Health, three from Otago University and two external reviewers – Prof. David Collins and Prof Helen Lapsey from Australia. The external reviewers are authors of a report that used similar methodology for a report in Australia.

While the level of professionalism to produce a credible report should command the (apparently) $135,000 fee, I am disappointed that people inside both Berl and the Department of Health are not reacting to the responses – indeed it seems defensive. While there has been some good robust discourse, but it seems a bit tit for tat, and much as we like to see a good fight, I’d rather see a quest for an agreed answer.

On such an important topic I feel that the only thing that matters is that we get the facts straight – and I would dearly like to see a re-worked and perhaps expanded paper that can be acceptable to academics, media, the public and even bloggers.

There is abundant material – so let me share the results of my own random walk through the topic by looking at each of the players involved.

The ACC is apparently a co-funder of the research, though there is no press release on the ACC website, and no mention in any recent speeches. From a public point of view they are out of it.

The Ministry of Health, through subsidiary National Drug Policy New Zealand, seems to be driving the activity. The NPD, which I was vaguely aware of, has the goal to:

Prevent and reduce the health, social and economic harms that are linked to tobacco, alcohol, illegal and other drug use. It does this through a balance of measures that:

  • control or limit the availability of drugs (supply control)
  • limit the use of drugs by individuals, including abstinence (demand reduction)
  • reduce the harm from existing drug use (problem limitation)

The NDP website is a bit out of date – showing former Associate Minister of Health – Jim Anderton – as the chair and eight other former minsters from the last Labour government on the Ministerial Committee for the NDP. It doesn’t bode well.

However the Berl report is on the site (reflecting their priorities perhaps), along with their latest report Research into knowledge and attitudes to illegal drugs which is not bad but by no means  flawless. For example they selected their sample of drug users from contacts and friends of contacts provided through drug treatment agencies – which is only going to capture those that have gone too far in their drug taking and their friends – not a representative sample. It’s liked selecting people for a study on alcohol from the people in a hospital detox unit and their friends, rather than from a pub on a Friday night.

That report also avoids digging into just why people take drugs – but only looks at the dark side.

Credit where it is due – the drug report does uncover that “just don’t do it” campaigns will not work – as people will do it anyway. It’s pretty good when it comes to formulating campaigns to reduce harmful use, just lousy as a policy forming instrument.

Back to the Berl report. From what I’m seeing on the NPD site it appears that the Ministry of Health is biased strongly towards stronger regulation of alcohol and drugs, whereas I would hope for a more nuanced approach from our normally balanced civil servants.


Business and Economic Research Limited has been around since 1958, and does, obviously, economic research. They clearly care about their reputation, and are, from what I saw at the Economic Conference, very good at presenting their findings. (Including a very entertaining and insightful one on the global financial crisis in NZ)

This reputation and lagacy makes the report and resulting kerfuffle all the more disconcerting. I am guessing that Berl are feeling a bit blindsided by all the media and academic reaction.

Their paper was presented at the NZ Economists Association Conference last week, but sadly I only saw the last few minutes. (I was diverted by a macro economic discussion of the global financial crises). I did see the reply, given by Messers Crampton and Burgess (below) but sadly at this standing room only event, the question period was killed in favour of lunch.What I did observe from the back of the room where several covered smiles and quiet snickers – while the sheer number of people in the room made it feel like a veritable lynch mob.

More concerning to Berl is that my understanding is that Berl are not revising the report in light of the academic and media criticism. I could be wrong, and I hope so, but I had a very brief chat with one of the authors at the conference – but he wasn’t happy talking to “a blogger”.

The Law Commission has been part of the news on the Berl report – and I really didn’t know much about them. Turns out the Commission..

…is an independent crown entity funded by government. It is a central advisory body established by statute to undertake the systematic review, reform and development of the law of New Zealand.

They also cover alcohol and drugs, it seems. The Law Commission used the Berl report in a speech in Nelson and another in Wellington by President Sir Geoffry Palmer SC.

While Sir Geoffrey says, in the second speech:

I do not believe it is the Law Commission’s job to advise New Zealanders about how much they should drink.

He later says that

The Law Commission will need to make recommendation about the legal framework for the sale and supply of alcohol.

The publicity arising from the first of these speeches is perhaps the reason that some, including the NBR, (and myself) initially thought that the Law Commission had paid for the report.

The Law Commission is publishing a “Review of the regulatory framework around the sale and supply of liquor” this month (July 2009). This is the policy response to the Berl report – and an important document as it feeds recommended law to the Government.

I’m a bit concerned that the Commission may be exhibiting a bit of anti-alcohol/drug bias, as evidenced by the paper published in May recommending that parliament does not use conscience votes for alcohol related laws – as they see that this makes it harder to pass strong anti-alcohol laws. This seems to be a disturbingly strong and one-sided recommendation that will help to ensure the next round of laws are passed. It may not matter too much, as the Government Whips managed, it seems, to have every National MP vote against a recent (albeit very poorly written) attempt at legalising medical marijuana.

Eric Crampton and Matt Burgess

Eric is from the Department of Economics and Finance at Canterbury University and Matt from iPredict [edited – I said both were from Canterbury earlier], and they wrote a compelling rebuttal to the Berl report, backing it up live at the NZAEC conference.

We find substantial flaws in BERL’s method that together account for well over 90% of BERL’s calculated costs of alcohol use. Corrected external costs of alcohol use amount to $662 million [Berl recorded $4,791.5m lw] and are roughly matched by the $516 million collected in alcohol excise taxes. The BERL report is wholly inadequate for use in assisting policy development.

Their three main issues with the report are:

  1. It uses a threshold for health costs to define a cutoff for economic costs
  2. It assumes anybody who drinks enough to cross an epidemiological threshold is
  3. It assumes anyone who is irrational enjoys zero gross (not net) economic benefits
    from drinking

They are particularly concerned that the Berl report does not match any benefits with the costs, and point the finger at the Law Commission for referring to the Berl report’s ‘dramatic findings’, which, when you add the benefits back, are not a big deal.

They are also concerned (as am I) at the line by line calculations of the costs (and they apparently don’t reference well.) In the hope that people will actually read this I’ll leave out the details – they cover it well. Once systematic error is that they attribute 100% to alcohol costs from people that are already costing society through another condition, like mental illness.

Finally Dr Peter Bushnell – Deputy Secretary of the Treasury was pretty scathing in an NBR article:

the onus should be on the Law Commission to be rigorous ….”

“..What we’re saying is it’s your reputation that’s at risk here. It doesn’t reflect well on the Law Commission if it … backs [work], that doesn’t have a sound basis.”

doesn’t look like it meets the “normal standards you would expect”

Where to next?
We are now waiting for the Law Commission’s policy document – and the reaction to that will be interesting. Indeed the Berl report has probably had the effect of increasing awareness of the forthcoming policy and thus activated many people whom otherwise would not have been engaged. Like me.

<update – see the later post>

Published by Lance Wiggs


4 replies on “Fix the Berl report on alcohol and drugs”

  1. oh spot on!
    I’m sooo pleased someone wrote an intelligent rebuttal to that shoddy piece of overpriced research of spurious value.
    Keep up the great blogging.
    Yours all impassioned and inspired


  2. BERL has made one minor adjustment in response to our criticisms: they have stopped counting excise tax revenues as a cost of harmful drinking. I had a beer with Adrian Slack on the Wednesday night; he suggested a couple of bits I might want to double check. I double-checked them and fixed errors amounting to $36 million in additional external costs, while adding in $197 million in excise-equivalent tax revenue that Treasury pointed me to. Our net external cost measure is now negative, though I’d still say that either number was insignificantly different from zero given margins of error in this kind of work.

    BERL’s main response thus far is that my critique hinges critically on strict rationality assumptions. Of course, I’ve rebutted that more than a few times, most thoroughly here. Follow the “BERL” tag there for the whole sordid affair.

    We’re going to put up a revised/corrected version of our paper end week or early next week to incorporate the bits at the top. We’ve asked Adrian Slack if he has any other bits where he’s pretty sure we’ve mucked up (entirely possible since we had no access to any of their underlying workings and their paper is opaque at best in parts). We’ll see what else, if anything, they have to recommend after having now had more than three weeks to look it over.


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