Thursday, June 18, 2009

NOT PJ: A Report into the Costs of Harmful Economic and Other Social Policy Analysis

The government’s pet analysts at BERL will be needing a stiff drink, says Bernard Darnton, after being eviscerated by Not PC reader (and Canterbury University economist) Eric Crampton.

Alcohol was on the menu at a Law Commission breakfast in March, when Geoffrey Palmer floated the idea of yet more government busy-bodying and higher taxes based on a report on the social costs of alcohol conducted by economic analysts BERL at the behest of the Ministry of Health and ACC.

The BERL report estimated the social costs of alcohol – whatever that might mean – at $4.79 billion. That’s a significant fraction of the New Zealand economy that’s supposedly missing or broken because we’re all too hungover to go to work and drunks keep breaking windows and each other’s bones.

I’d be the first to admit to occasionally having such a good time that I forgot to go to work the next day. Sadly the work I missed didn’t just evaporate like evanescent sambuca flames; I just had to catch up later. No lost productivity there (bugger it). Likewise, health costs: Anyone who’s been into Dunedin Hospital’s Accident and Emergency department on a Friday night knows that there are no health costs. You get given a 12-cent photocopy of a leaflet called “So You Think You’ve Broken Your Nose” and told to bugger off.

The analysts at BERL, however, won’t accept my reminiscences as a valid criticism of their cost/benefit analysis. Fortunate, then, that Canterbury University economist Dr Eric Crampton has helpfully produced an arse/elbow analysis of their report.

Economists’ language is usually dry – dryer than Charles’s eyes at Diana’s funeral – but Dr Crampton and collaborator Matt Burgess have trouble restraining themselves. BERL’s estimates of costs are “grossly exaggerated.” They use a “bizarre methodology” and make “very strange assumptions … without any reason or evidence.”

Translating from Academic into English, this is saying that they’re mad. Batshit Crazy. Crazier. Crazier than the shit of vampire bats who’ve been feeding on mad cows and rabid dogs. He’s saying that to believe their conclusions you’d need to have lost more marbles than the Greek Antiquities Commission.

One of the subtle methodological flaws that Crampton and Burgess pick up is that the cost/benefit analysis contains no benefit analysis. My favourite paragraphs in academic papers are the ones that begin, “Astonishingly, …”

The BERL economists assume that anyone who consumes more than two drinks in a session (not that they ever use the word “session”) is irrational and derives no pleasure or other benefit from this activity. Remind me never to go to the BERL Christmas party.

Of course alcohol has benefits – otherwise I wouldn’t buy it. And I buy loads of it so the benefits must be huge. This column, for example. Then there are the sensuous pleasures: the earthy bouquet of a Central Otago pinot noir, the perfectly balanced palate of a Gisborne chardonnay. And don’t forget the immense pleasure to be had masturbating in public – verbally of course, about the earthy bouquets of Central Otago pinots and perfectly balanced palates of Gisborne chardonnays.

Dr Crampton’s critique goes on to dissect the haphazard accounting, the bad economics, the frequent use of misleading language, the lack of transparency in calculations, and many other crimes against logic committed by the report’s authors. He struggles to keep a straight face while referencing Karl Marx (“students of economic history will recognise … a theory discredited”) to explain some of BERL’s reasoning.

He goes on to point out the vast mass of literature on the subject that BERL completely overlooked, presumably because they didn’t look in any actual economic journals, instead copying a similar study done in Australia – one panned for the same faults. The authors of the Australian study that this one was based on were then called in to provide an “independent” peer review. (Apparently they thought it was smashing – “couldn’t have put it better myself.”)

Dr Crampton advises in his accompanying press release that “the Law Commission should give no weight at all to the findings in the BERL report.”

If Crampton and Burgess are anywhere close to right, this report is so shoddy that the only excuse could be that its authors were drunk.

The only non-sinister excuse, that is. Conclude Crampton and Burgess: “A year-long study commissioned by the Ministry of Health and the ACC at a cost of over $135,000 must surely have some purpose. We leave it to readers to consider what that purpose might be.”

* * Read Bernard Darnton’s column every Thursday here at NOT PC * *

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5 Comments:

Blogger Stevew said...

I hope the Ministry of Health and the ACC will be asking for a refund.
I'm sure they got exactly what they wanted (asked for?) in the report's conclusions, but I'm sure they are embarassed that its "scientific" underpinnings are so easily and comprehensively demolished.
An unforgivable waste of taxpayers' money any way you look at it.

6/18/2009 09:25:00 am  
Blogger Crampton said...

The scandal is not the amount paid for the report. $135,000 isn't much in the grand scheme of things. The scandal rather is that this report may well wind up supporting legislation that will impose millions of dollars of useless costs on Kiwis who enjoy alcohol in moderation.

6/18/2009 11:05:00 am  
Blogger Paul Walker said...

To be fair Crampo, if they can get $135,000 for that report we are in the wrong business!

6/18/2009 11:20:00 am  
Blogger Stevew said...

Maybe $135,000 isn't much to a Wellington bureaucrat (though many New Zealanders would disagree), but it would be a scandal if the Ministry of Health and the ACC don't carry out their fiduciary duty to the taxpayer and get the money back - they have clearly been sold a lemon.

Of course you are right that it shouldn't be used to support legislation (though I'm sure it will). It's bizarre that legislation on what people drink should even be conceived of.

6/18/2009 12:34:00 pm  
Blogger Shane Pleasance said...

I reckon we should have a whip round and commission BERL to do more research

Cost of fags
Cost of Government

6/20/2009 05:48:00 pm  

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