Berl economist hits back at alcohol report critics

 The lead author of the Berl report on the social costs of alcohol says the criticisms of it are unfair and misplaced.

Adrian Slack says Berl was only commissioned by the Ministry of Health and ACC to look at the social costs and not the benefits of alcohol, and would have needed an additional $135,000 were it to extend its remit to examining the benefits and policy implications.

“We’ve done half the equation and clearly pointed out that this was a costs study. It wasn’t intended to be a cost benefit analysis, which is what [Dr Crampton who criticised it] would like us to do. As an economist I would like to do that but that’s not what we can provide, within the budget and within the scope that was provided. Now in terms of forming policy, knowing about the costs of alcohol misuse is useful, it gives you some direction on where are the biggest problems, where should we focus.”

Canterbury University lecturer Dr Eric Crampton and colleague Matt Burgess from Victoria University have been unusually harsh in their criticisms of the report, as NBR found here.

Mr Slack has responded to their criticisms by defending the framework Berl used as being the same as that presented in a much-cited paper by Australian economists Collins & Lapsley, the World Health Organisation, and “the Canadians... it’s an international framework. And from that point we say if you accept that people drinking alcohol are not necessarily always making rational decisions, then their benefits may not match their costs.”

He accused Dr Crampton & Mr Burgess’s critique as being based on strong assumptions about perfect markets, perfect information, and individual rationality.

“So for example someone who murders someone, from the individual’s point of view, Eric would be, I presume, quite comfortable with that. The person who decides to murder someone else makes an evaluation of what are the benefits and costs to me of this action? Society says ‘well some people do murder other people’, but society says ‘that’s not good.’”

He ran out of time to address other points raised in the critique, such as:

• Why Berl counted excise taxes collected as a resource cost of harmful drinking but not listing it as having a matching benefit to government
• Why all wage costs were multiplied by 1.87
• The assumption that any crime where the criminal said alcohol contributes in some way to offending would completely disappear if harmful drinking went away
• If 2 pints a day is fine, why wasn’t the threshold for harmful use say 3 (or 4 or ...) pints per day, or more than 6 pints at least twice a week, or more than 7 pints at least once a week...

Update: Berl has released a more comprehensive rebuttal of its critics here.

Treasury Secretary clarifies

In reference to another NBR article covering the issue, deputy secretary to the Treasury Dr Peter Bushnell said that it may have appeared that he was critical of Sir Geoffrey Palmer or the Law Commission. Dr Bushnell wanted to clarify that he did not intend to cause offence to Sir Geoffrey or the Law Commission and apologised unreservedly for any offence caused.

“My comments were meant in a general sense and covered the mechanisms that exist to encourage quality research. I stand by the general point I made to your reporter that all agencies that propose policy should seek rigorous advice. In my opinion, the Law Commission has quite correctly used those mechanisms, seeking research and advice from several sources, including seeking advice from Treasury on the Berl report. Sir Geoffrey Palmer and the Law Commission are working to ensure that law and economics perspectives are brought to bear jointly on policy issues”, he said.

Sir Geoffrey (finally) steps in

Law Commission president Sir Geoffrey Palmer was away in Portugal for a meeting for the International Whaling Commission when first contacted by NBR regarding comments he had made citing figures from the Berl report.

He said at the time that the commission was unable to state their view, but would set it out in its final report due at the end of the year.

Sir Geoffrey has now said to NBR that he sought Treasury advice on the issues in the Berl report on 22 May 2009, “long before the report by the two economists that stimulated your article appeared. Furthermore, at the same time I secured further advice from another independent economist.”

In a speech to police in Nelson on 24 April, Sir Geoffrey quoted headline figures in the Berl report of $5.296 billion in social costs of alcohol (and drugs), versus the alcohol excise tax take of $795 million, as a basis for his preferred policy option of significantly raising excise taxes to cover the shortfall.

"I doubt that such a proposition will be met by great enthusiasm. It does seem to me that the taxpayer should not be asked to shoulder as much of the burden as is currently being met from public funds," Sir Geoffrey said.

"It does seem that the case for increasing the price of alcohol to ensure drinkers contribute more to the costs imposed on society is persuasive."

He has indicated he hopes to have a discussion paper outlining issues for public submissions available this month.

This article is tagged with the following keywords. Find out more about My Tags

Post Comment

13 Comments & Questions

Commenter icon key: Subscriber Verified

BERL knew full well the purpose for which the research was commissioned... for the purpose of policy making. It is a little lame now to come back and say the paper done isnt fit for use in a policy framework cos it only analyses the costs and not the benefits of alcohol.

So will BERL refund the Law Society on the costs of a report that didnt address their requirements?

Reply
Share

"Adrian Slack says Berl was only commissioned by the Ministry of Health and ACC to look at the social costs and not the benefits of alcohol"

Did you actually read the article? the Law Society didn't pay for the report

Reply
Share

Law commission, not law society...obviously the report addressed the brief, whether or not the brief dealt robustly with the costs and benefits issues is the point...

Reply
Share

A good Statistician can produce figures to prove damn near anything if they want to. You start with tailoring your questions to ge tthe answres you want. You carry on by "massaging" the figures. Ignore what you find works against you, enhance what works for you.

Alcohol is a fact of life, like prostitution. Been with us since Adam pretty much. Dickering around with Taxes simply creates distortions in supply and demand, but does not eliminate the "crime", if it is one.

Look over the ditch. Massive increase in Excise Tax to deter youg females from drinking RTD's. It achieved a major drop in RTD sales, and lifted sales of bottle spirits. So now they mix their own, or the boys mix it and overload on the spirits hoping for the benefit to themselves. with RTD's, at least there is a chance that they are aware of how much alcohol they have consumed.
Stop wasting taxpayer money on totally stupid "research" like this and we will all be better off!

Reply
Share

Bunch of wowsers the lot of them.

Reply
Share

It's time someone in government did a hatchet job on the Section 32 reports being published by planning firms to support SMart Growth plan changes – which will do far more damage to the economy than anything we do with liquor.
The section 32 report is supposed to include a benefit cost analysis to show that benefits exceed costs. I have just read one, 78 pages long, which when subject to a search on 'dollars' and "$" turned up zero hits.

The major cost it identified was the cost of doing nothing which could lead to market led growth and development.

And the massive string of costs of development contributions were not counted as costs because the developers paid them.

We urgently need all proposed plans be subject to a review by a Parliament based RMA review committee before being inflicted on the public. These plans being rushed through now to beat the new laws will go largely uncontested because no one has the time or money to challenge them on priniciple.

Reply
Share

'Failure has a thousand excuses; success doesn't need one.' I think we might want to learn, as a society, that coming up with poor excuses, which make things sound bad (why use a murder example?), and then 'run out of time' to answer more points is unacceptable. It's this sort of commentary and buck-passing that cause so much trouble in government and for business.

What's more, saying that it would cost another $135,000 to do the report properly is absurd. That's over two years salary, let's say a even a well paid economist's full year salary. That is an amazingly bad excuse, if ever I heard one. I can imagine saying that to my boss now.

Reply
Share

Nick, BERL could have done the whole job in this report if they had decided to confine their attention to external costs only, rather than private + external, a much bigger job. That approach would have delivered a methodologically defensible report to the Ministry with policy guidance and for perhaps half the money.

You'd end up with much smaller headline figures, though.

Reply
Share

Maybe you should look at changing jobs, Nick. If you're qualified. (Try Kiwi Careers for some suggestions - http://www2.careers.govt.nz/home_page.html)

If you take the mid-point of the salary range ($70k-110k) from the Robert Walters survey for Wellington in 2008 (http://www.robertwalters.com/resources/salarysurvey/New%20Zealand%202008...), you're looking at a salary of $90k for a Quantitive Analyst. And given salaries are about half to a third of a business' cost you'd have to multiply this by somewhere between 1.5 and 2 to get the cost to the business, i.e. $135k to $180k.

Or you can look up some other income by occupation stats from the 2006 Census (http://www.stats.govt.nz/products-and-services/table-builder/table-build...). The average annual salary for Professionals was about $56k in 2006. With wage inflation, you'd have to lift the 2006 figures by about 10% (for Professional occupations) to get an approximate 2008 salary - about $61.5k. But this average includes all your grads and baby analysts. You'd need to increase it if you were at the senior level - maybe by a third - which would put you pretty much at the level noted above.

Reply
Share

Matt, wasn't the point that the job BERL was asked to do was a cost study?

If you're the same Matt who wrote the criticism, aren't you just saying the same thing again? You're criticising BERL for doing what they were asked to do?

That's what contracts are for right, so everyone knows what's expected. Or do you reckon that consultants should just ignore the contract and do what they want? Doesn't sound like what an economist would usually recommend.

Reply
Share

Consultant, yes that's the line BERL has been pushing and I believe it is disingenuous. Couple of points. First, I don't buy the argument that the consultant should simply answer whatever question is put in front of them when a more useful, lower cost approach that makes economic sense is available. If the client wanted a defensible number from an economic point of view, then BERL has let them down. On the other hand perhaps, and I speculate, the client simply wanted a big number regardless of its information value. Well, if that's what happened then I'm not particularly comforted that BERL wanted to sell it to them. I used to be a consultant and I was fortunate enough to work for a firm that never once asked me to say something that didn't make sense.

I'm not sure whether to sympathise with the client (MoH and ACC) or not, but I am certainly concerned as a taxpayer that so much was needlessly paid for so little, and as a citizen that new regulation and taxes are in danger of being introduced on evidence this badly flawed.

I'm not suggesting BERL breach their contract, but I am troubled by their willingness to agree either to undertake more work than is necessary and useful and to produce a report that is lacking in its economics, or perhaps their willingness to be a gun for hire.

Reply
Share

An economist I would similar to perform that but that’s not what we can provide, inside the financial plan and within the range that was provided. now in terms of forming strategy, meaningful about the costs of alcohol misuse is helpful, it gives you some way on where are the major harms.
<a href="http://www.miramarlagunabeach.com">Drug Rehab Center</a>

Reply
Share

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7850 0.0000 0.00%
AUD 0.8924 0.0000 0.00%
EUR 0.6196 0.0000 0.00%
GBP 0.4880 0.0000 0.00%
HKD 6.0917 0.0000 0.00%
JPY 84.8970 0.0000 0.00%

Commods

Commodity Price Change Time
Gold Index 1231.3 2.700 2014-10-24T00:
Oil Brent 86.1 -0.700 2014-10-24T00:
Oil Nymex 81.0 -1.020 2014-10-24T00:
Silver Index 17.1 0.020 2014-10-24T00:

Indices

Symbol Open High Last %
NZX 50 5292.8 5344.4 5292.8 0.77%
NASDAQ 4459.5 4486.3 4452.8 0.69%
DAX 9008.6 9044.9 9047.3 -0.66%
DJI 16677.0 16811.7 16677.9 0.76%
FTSE 6419.1 6419.1 6419.1 -0.47%
HKSE 23311.9 23352.6 23333.2 -0.13%
NI225 15354.4 15377.0 15139.0 1.01%