Some good progress on the saga of the Berl report on Costs of Harmful Alcohol and Other Drug Use.
Berl have posted a response to criticism, including a letter of apology from Treasury.
They note that the request for tender stated “You shall complete a cost analysis using an accepted framework and deliver a report on the costs of alcohol and other drug abuse to New Zealand.” Further, the WHO International Guidelines was provided as an example of an “accepted framework”.
Berl used those WHO guidelines, however given the subsequent dismantling of the method this points the finger at the tenderers – the Ministry of Health and ACC.
Berl also push back on some of the Crampton and Burgess study, both pointing out errors and challenging their assumptions.
It’s an aggressive piece (Read it: Berl rejects criticism of study), and they point out that they do in fact have 50 years of reputation which they do not want to lose by writing results on demand. I hope that means they will keep on this.
However I’m not sure that they are that close to reconciling with Crampton and Burgess (and others).
Meanwhile as Eric Crampton writes in the comments in the previous post that he had a beer (love that) with David Slack from Berl and subsequently made some adjustments to the calculations – adding back $36m in costs. However this was more than outweighed by the new subtraction of $197m in excise duties that Treasury had pointed out. Net net that means rather than showing a small net cost of alcohol to New Zealand, they are now actually showing a benefit – though Eric contends both are essentially zero with the margin of error in these sorts of studies.
Let me repeat that – one study says that the Cost to New Zealand of harmful alcohol and drugs is $6.88 billion, while another study says that it is zero, or even a benefit. The policy implications are huge – so we need to get this right, and we need to make sure that the Law Commission and legislators understand this discussion.
Crampton and Burgess are also re-writing their paper, which is good, publishing within days.
It is excellent to see this discourse from both parties – and I trust that it will continue, as ultimately the policy of NZ will be governed by the agreed answer, the right answer.
It’s a far cry from the USA where we often see “black” and “white” presented and no attempt to bridge the gap, and lobbyists pushing their own barrow to the exclusion of all else. If we can continue the ‘beers’ and academic discourse then once again we can all be proud to be from New Zealand.
I hope and trust that the Law Commission hold off on their policy paper until the academic dust settles – let’s not make laws based on faulty premises.
I don’t anticipate that we’re going to wind up meeting in the middle on this. BERL is happy to count private costs as social costs on the basis of an assumption that private benefits are zero, then defends their method by arguing that benefits were outside of their remit. We keep our analysis to externalities, which we think it the only defensible method in the absence of good data on actual enjoyed benefits of alcohol.
I’m hoping for more considered discussion at least.
Perhaps all we can aim for is a single paper/page/table that shows both approaches at once and, critically, is used by the Law Commission. Lance
In case you’re interested, Matt and I revised things this past year. We found an error that BERL hadn’t pointed out to us that increased our measure of alcohol’s social cost; we only found it on rather thorough dissection of the report on which BERL’s was based – Collins & Lapsley 2008. We now show a net cost of over a hundred million. Which is still within margin of error.
Anyway, the updated paper is here: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1129.pdf
I really hate that policy seems responsive to measures of aggregate burden when it’s relatively irrelevant in an economic sense: what really matters is the responsiveness of any measure of net costs or benefits to changes in policy. Heavy drinkers are seriously undertaxed relative to the harm they cause but we’re constrained by a linear excise tax regime that overtaxes moderate drinkers. Increasing excise rates then curbs harms from the heavy drinkers while imposing costs on moderate drinkers, and nobody’s much considering those latter costs. Worse, since heavy drinkers’ consumption is less price responsive than moderate drinkers’, tax increases are a pretty blunt instrument. Better, I’d argue, to address harms directly: more vigilant drink-driving enforcement, a zero blood alcohol limit for repeat drink drivers, ignition interlocks for repeat drink drivers, supplementary penalties for committing offences while intoxicated.
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