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.