Don’t forget the benefits
April 27th, 2009 at 5:33 pm by David FarrarEric Crampton takes an excellent look at so called research studies which calculate a cost of an activity (drinking etc) without ever calculating the benefits, and hence they are very flawed as a basis for decision making. He highlights this little reported point from the alcohol report:
This study takes a conventional approach for economic cost studies, which “do not attempt to fully consider the economic benefits of alcohol… and other drugs, and should not be confused with cost-benefit or cost-effectiveness analyses” (Single et al, 2003: 14).
Crampton comments:
In other words, everything is a cost. Imagine applying this methodology to anything else. What are the costs of car use? Of apple growing? Of coffee? It’s very easy to get big numbers on the cost of anything, if you don’t offset the corresponding benefits.
So lesson number one is ignore any research that measures costs only.
He looks at one example:
The study counts as costs reduced labour productivity. If you go to work with a hangover, you’re less productive. Similarly, if you spend a night out on the town rather than putting in the overtime, you’re not producing as much. If we only count costs, then these get included: costs to society via lost output and costs to the government via reduced tax revenues. But if we worry about NET costs rather than gross costs, these have to disappear. Why? Because if I decide to drink and be less productive at work, I’m less likely to get a promotion or a salary increase. My productivity affects my wages. If I decide to be less productive and have a lower expected salary path, that’s between me and my employer: I’m bearing the costs. If I decide to do it, that’s prima facie evidence that I weigh the benefits as greater than the costs.
We get the same from the lobbyists for banning cellphones from cars. They never calculate the benefits of cellphone use in cars, just the costs.
Related posts:
- Benefits of alcohol
- Eric the murdering economist
- The benefits of immigration
- Alcohol costs grossly exaggerated
April 27th, 2009 at 5:45 pm
“We get the same from the lobbyists for banning cellphones from cars. They never calculate the benefits of cellphone use in cars, just the costs.”
That isn’t a fair comparison. The cost of car cellphone useage that people talk about is human deaths, and just one of those is bad enough. I would rather not look for dollar benefits to “offset” those, wherever possible.
(The Ford Motor Co did enough of that with their Pinto cars, that burned several people to death when the risk could have been all but eliminated for a few more dollars per car.)
Otherwise, this is all very interesting stuff.
Vote:April 27th, 2009 at 5:54 pm
You notice the same thing when people quantify the “costs” of car use, in an attempt to show that motorists don’t pay their way. Often the costs of delays are included, using some notional hourly rate for people stuck in traffic. But ignoring that this cost falls entirely on people themselves and their employers. There seems to be a belief in the anti-car sector that people should be delayed, and then pay the government a tax to cover the government for the “cost” of the delay.
Vote:April 27th, 2009 at 6:00 pm
Ratbiter>That isn’t a fair comparison. The cost of car cellphone useage that people talk about is human deaths, and just one of those is bad enough. I would rather not look for dollar benefits to “offset” those, wherever possible.
I read of some aircraft safety improvement legislation in the States that, by raising the cost of flying and therefore forcing more people on to the road, led to an increase in deaths. Anti-cellphone legislation would have to look at the resulting loss of productivity, and therefore decrease in incomes and taxes, and therefore increased death rate due to all the reasons that low income societies have lower life expectancies than high income societies.
Vote:April 27th, 2009 at 6:12 pm
“Because if I decide to drink and be less productive at work, I’m less likely to get a promotion or a salary increase. ”
Unless you are drinking with the boss of course.
Vote:April 27th, 2009 at 6:14 pm
Not to mention some of the intangibles such as Friday drinks building firm collegiality, allowing “time out” from work etc. Work life balance seemed to be a popular theme at some point. Hard to measure I accept but has relevance.
Vote:April 27th, 2009 at 6:35 pm
Eric adds an additional posting on this topic at Offsetting Behaviour.
Vote:April 27th, 2009 at 6:58 pm
It’s all smoke and mirrors with the tobacco stats too. On both sides.
Vote:April 27th, 2009 at 7:01 pm
Anyone who uses a cellphone while driving is a shit head putting themselves and others at risk. Queensland, automatic $250 fine and that’s how it should be. Why did the truck go into the lake today? Cellphone?
Vote:I see accidents waiting to happen everyday, avoided only by the actions of other drivers.
Ban the bloody things, nothing you have to do whist driving is more important than driving and nothing you need a cellphone for while driving is more important than your life and the lives of others. A matter of sensible priority.
April 27th, 2009 at 7:46 pm
Likewise:
Friends with COSTS
Vote:April 27th, 2009 at 7:58 pm
They never calculate the costs of slowing traffic on NZ roads so that they virtually travel only a little faster than walking speed.
They never calculate the cost of bombarding people with so many commercials on road safety it totally destroys their self confidence and leads to fear and trepidation which leads to more crashes.
Vote:April 27th, 2009 at 8:15 pm
Seriously though alcohol is really really bad. Really.
Heard of the acid-alkali balance? Google it.
Alcohol is pure acid.
Vote:April 27th, 2009 at 8:46 pm
reid – you obviously failed chemistry and biology
alcohol is pretty much PH neutral and the body has learnt to deal with acidic and alkaline food – PH inbalance treatment as touted on the net is quakery of the worst sort – PH inbalance is the result of a problem not the cause of a problem
your post is that inaccurate I’m thinking it might be ironic and quite subtle – please tell me it is -please?
Vote:April 27th, 2009 at 8:56 pm
ratbiter, you’ve used the moron’s argument: “If it saves just one life, it’s worth it”.
It isn’t. Cell phone use in cars saves a lot of wasted journeys. Some of those journeys would result in fatalities. Ignore the morons and do the calculations.
Moreover, some people use cell phones safely and some don’t. Risks are not uniform which is the other basic fact always ignored.
Slijmbal, too true, plus reid’s stomach is a hell of a lot more acid than alcohol is.
Vote:April 27th, 2009 at 9:02 pm
Viking2, what a load of rubbish. If you can’t use a cellphone safely and appropriately you shouldn’t be driving.
Likewise if you can’t exceed the speed-limit safely and judge where and when it is safe to do so you should have your licence revoked immediately for gross incompetence and stupidity.
Vote:April 27th, 2009 at 9:11 pm
Jesus, pull over and use the phone, Alan. Or is pulling over the scourge of the roads?
Vote:April 27th, 2009 at 9:15 pm
Man, DPF, that is a thin argument.
Of all the things you could have attacked about the $5 billion ‘cost’ of alcohol you say ‘don’t forget the benefits’.
Asking for a delayed breakdown of these ‘costs’ might be a better place to start.
Vote:April 27th, 2009 at 9:17 pm
Depends where you are, transmogrifier, and what’s around you. Circumstances change everything. Eg: breakdown stalled in middle lane causing a tailback and very dangerous braking and swerving. You are in the fast lane in heavy traffic. Right hand shoulder too narrow to stop in.
Call *555 and report problem asap – or not, leave someone like you to get killed instead but, hey, I don’t use a cellphone while driving.
Vote:April 27th, 2009 at 9:19 pm
Ratbiter, that’s a classic idiots argument. Lives are “costed” all the time. We could design vehicles that were (almost) entirely safe, however the costs are such that no one would buy them. Imagine an M1 tank equivalent (without the gun, sorry Murray) speed limited to, say, 30 kmph with special pedestrian pickup baskets, etc etc. What ever car you drive, it could be safer, if you spend another $50K on it it WOULD be safer, have you done that yet ?
Ford made a cost decision, and were sued for it. However it is worth noting that subsequent research seems to show that the Pinto had a “death from fire” rate no different from other similarly sized cars of its time. The so called “Ford Memorandum” publicized by Mother Jones magazine that led to much of the legal activity was actually based on the NHTSA regulations rather than a purely Ford sourced document. Probably best described as yet another liberal urban myth of “callous capitalists”, in reality mostly another legal gravy train so beloved by US trial lawyer associations. Wikipedia, not always a wonderful source, has some readily available information on it with links for further research if you are interested.
Also, to even further undermine your idea of not placing a $ value on lives, the whole NZ Health system is based on just that, and weren’t you arguing AGAINST funding Herceptin because of the cost ?
Vote:April 27th, 2009 at 9:23 pm
Seems strange to me you’d infer someone is a moron for ” a single life saved is worth it” and then base your entire argument around a single theoretical situation: involving someone’s life being saved.
Vote:April 27th, 2009 at 9:43 pm
All I know is mate, that when I alkalise myself – broccoli, cauliflower, lemon juice, et al, I feel fan fucking tastic.
Vote:April 27th, 2009 at 9:47 pm
It might be strange if I had done that, transmogrifier, but I didn’t. I simply gave a single counter example (as it happens, one I have experienced myself) to show that your assumptions are incorrect.
Now that you appreciate there is at least one instance where it is preferable to use a cellphone while driving I leave it as an exercise for you to think of others. Thinking is always healthy.
Vote:April 27th, 2009 at 9:50 pm
reid, if you can alkalise yourself using lemon juice you must be one hell of an acidic character.
Vote:April 27th, 2009 at 9:52 pm
“reid, if you can alkalise yourself using lemon juice you must be one hell of an acidic character.”
That’s the odd thing, Alan.
Lemon juice once digested is actually alkaline.
Look it up.
Seriously mate, look at science, I don’t give a shit.
I’ve tried it. It works. Every time. Then I get back on the piss for awhile.
Seriously. Try it.
Vote:April 27th, 2009 at 9:58 pm
It might be alkaline once digested but then it is no longer lemon juice. And it left you with a dose of acid on the way there.
Anyway, if stuff works it works. Just don’t worry about why or explaining it. And don’t believe stuff people tell you until you’ve tried it. Chances are their explanations are b.s. anyway.
Vote:April 27th, 2009 at 10:09 pm
Alan, we’re a battery.
We’re an electro-mechanical organism. We need electricity to live. How does our brain work? We therefore have to maintain a sharp balance in our acid-alkali balance to sustain that conducive environment. With me so far?
If this doesn’t happen, we die. The tolerance is small. Trouble is, our diet tends almost exclusively toward the acid. The body maintains the balance by leaching alkali sources where it finds it, particularly from the organs and then from the bones.
What about that is incorrect, if you doubt it?
Vote:April 27th, 2009 at 10:16 pm
reid, I wouldn’t know where to start on that lot.
And what would be the point anyway? If it makes you happy, go with it.
Just don’t expect a scientist to like it.
Vote:April 27th, 2009 at 10:23 pm
Yes you’re quite right Alan, what a load of old rubbish.
I meant to say of course that the acid, far from being leached from the organs, is actually absorbed by them, while at the same time the alkali is, I said, leeched from the bones.
Is that better or worse news?
All you have to do Alan, is to google “acid alkali diet” and try it assiduously then report back.
Isn’t that scientific?
Vote:April 27th, 2009 at 10:31 pm
You are driving along listening to commercial radio (cos you couldn’t find radionz)
Vote:and the announcer says if you know which song the lyrics “‘Ere thrice the sun done salutation to the dawn” come from,
you will win an all expenses trip to holy wood to the osars,
You grab your cell phone and give them the answer
and within 3 weeks your are whisked to the fabled red carpet
“there are benefits to having cell phones in cars” you whisper to none in particular
April 27th, 2009 at 11:13 pm
YesWeDid the benefits are almost certainly the same order of magnitude as the costs, and they are essential to understanding whether more or less regulation and taxes is suitable. If benefits, properly calculated, exceed costs then the calls for more regulation and taxes cannot be justified on economic grounds.
The point is that BERL hasn’t done the calculation, yet it is standing by while others mistake their analysis for a test of regulation’s value. It isn’t.
Vote:April 27th, 2009 at 11:18 pm
What assumptions are incorrect? I haven’t told you my argument. I made two single sentence comments. Presumptive much?
But I’ll play: you’re driving to a meeting. You decide to call that person to make sure they’re coming (though you probably should have done that before you left). While looking down to dial, you bowl over a kid using a pedestrian crossing who you didn’t see. You decide to drive off because there’s no-one around but you have a guilt attack and call the ambulance as you speed away.
Oh, you’re right after all. Sorry.
PS This arguing thing is easy. Hypothetical counterexamples are much easier than logical arguments. Thanks for the new outlook.
Vote:April 27th, 2009 at 11:20 pm
reid – shame you weren’t at North Harbour stadium with a few lemons on Saturday evening
Vote:April 28th, 2009 at 6:00 am
The only benefit I can think of to alcohol consumption is that people enjoy it. That ain’t no small thing and it’s hard to put a price on happiness, but it’s a private benefit not a public one and the costs of alcohol abuse are largely public – notably the massive expense to the health and criminal justice systems.
The whole point of the study is that people who abuse alcohol are enjoying the benefits of a low cost drug while the externalities are being subsidised by the taxpayer. Isn’t this the evil welfare state, political correctness gone mad, etc?
Vote:April 28th, 2009 at 6:35 am
Stick to the satire pal.
Vote:April 28th, 2009 at 6:35 am
So lets be honest – no one here wants the drink drive limit reduced and no one likes the ideas of the law commission or Geoffrey Palmer. Fair enough. I don’t like Sue Bradford’s ideas either, but have never analysed the benefits of bashing children to death.
Lets see.
Lowers benefit payouts to a parents after initial cost of funeral.
Parents get more sleep at night thus improving productivty at work or job search opportunities.
Lowers Carbon footprint of the family, thus saving the islands of the pacific.
Halts the cycle of violence in abusive dysfunctional families by removing the abused object.
In the event of no conviction, projected corrections costs now nil.
Yeah all pretty fuckin’ dumb isn’t it. Sooner or later people have to learn to argue constructively instead of just arguing to prove they can masturbate verbally.
Vote:April 28th, 2009 at 6:53 am
The average Labour voter:
http://www.telegraph.co.uk/news/picturegalleries/howaboutthat/5230467/No-Regrets-The-Best-Worst-and-Most-ing-Ridiculous-Tattoos-Ever.html
Vote:April 28th, 2009 at 6:54 am
DPF
Unfortunately the benefits of both your examples are usually very personal, whilst the cost of both of those when they go wrong are born by all New Zealanders. Funny though that usually those arguing for either of those are unwilling to accept the cost if and when something goes wrong.
So.
DPF, speaking hypothetically.
If you are busy splitting your concentration between a phone call to one of your friends and your driving after a few drinks at the local and you are involved in a fatal accident caused by your lack of concentration on the dangerous task, will you pay the salary of the person who died until their retirement age?
Will you be there to walk their daughter down the isle, to go fishing with the son and so forth?
Will you bear the full cost, after you’ve considered the benefits to yourself?
I suspect the majority of people looking at this as a cost / benefit analysis are not looking at all the costs other people have to bear for THEIR pleasure. And that fucks me off to no end.
Vote:April 28th, 2009 at 7:48 am
I’m pretty sure that over the last ten years or so, cell phone use has increased exponentially, over the same period, the road toll has been reducing. Therefore, the effects of cell phone use on the road toll are less than other factors which have led to a lowering of the road toll.
While there have undoubtably been some deaths caused by cell phone use while driving, there have been deaths due to cd players, is there a case for banning those? My friends mother died due to her kids distacting her, should kids therefore be banned from cars?
The overwhelming factor in the road toll is the quality of roading, but the solution seems to be to blame drivers for everything else when the tax collectors are notfulfulling their responsibilty of providing safe roading. Anybody who has lived in a rural area will quickly notice that crashes all happen on the same patches of road, if driver error or behaviour was the main problem, crashes would occur over a random distribution of the road system.
After hundreds of thousands if not millions of k’s of driving my father managed to avoid the hazards of speeding, cell phone use, being male etc. and died on a stretch of road known to be an unsafe and needing to be fixed. Is the Minister for Transport gonna come fishing with me now Pascal?
Vote:April 28th, 2009 at 7:52 am
lol at we’re a battery because the brain works on electricity
Vote:April 28th, 2009 at 9:05 am
It always annoys me that the benifits of gettign off ones nut are not included.
I mean.
Its ..
Fun.
Vote:April 28th, 2009 at 10:12 am
> if I decide to drink and be less productive at work, I’m less likely to get a promotion or a salary increase.
That’s correct; just ask Steve Walsh.
Vote:April 28th, 2009 at 2:06 pm
For the folks saying most of the costs of alcohol are public: that is not true in the BERL report. 75% of their reported costs are internal.
Vote: