Eric the murdering economist

I have previously covered the damning critique done my Eric Cramption and of the study which found the cost of consumption was around $5 billion a year. Crampton and Burgess cited multiple errors in the BERL study (including no counting of benefits) and concluded it was actualyl less than 5% of that.

NBR reported last week a response (finally) from BERL:

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. …

A pity that it was not made clear at the time it was costs only. I wonder why the Government would see value in commissioning a paper that looks at costs without benefits. Anyway onto the next comment my Mr Slack:

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.’”

Now that was not a type. He just said that would be comfortable with someone murdering someone (from an economic perspective). This is BERL’s response instead of a detailed point by point response to the 30 to 40 errors cited in the report?

Paul Walker responds with disbelief – not just from the sillyness of the analogy, but the repeating of economic mistakes:

If the only costs of murder were the internal cost to the murderer then we may not be too concerned with murder. BUT, there are some obvious, to most people if not Adrian Slack, external costs to murder, that is, the loss of life of the victim. The victim is the victim because they have not willingly agreed to be murdered, that is what makes murder, … well … murder.

I have no doubt that both Eric and Matt are opposed to murder, and for the very good reason that it violates the victim’s property right in themselves. Murder is not a market transaction in the sense that it is not a voluntarily agreed to trade resulting in both parties being made better-off.

One of the major points that Matt and Eric made about the BERL report is that BERL didn’t seem to know the difference between internal and external costs. The Slack quote above only reinforces that point.

Indeed an own goal. Eric Crampton also responds:

Economists tend to think that murder is a bad thing. Why? Well, despite the murderer presumably enjoying the act, his gain comes at a cost that he doesn’t personally bear: the death of his victim. That’s the kind of cost that economists tend to call an externality. And so economists tend to support laws against murder. We similarly tend to support laws against theft: while the thief tends to think taking other folks’ stuff is a good idea, the thief’s victims tend to be hurt by it and the thief won’t weigh those folks’ losses against his gains. In these kinds of cases, individuals’ rational calculation of their own costs and benefits lead to socially bad outcomes because of the substantial external costs.

Eric goes on to say that having BERL paint him as pro-murder (economically) is gettign close to a version of Godwin’s Law where you should concede defeat if that is the best you can do.

also comments on the costs vs benefits issue:

But just because I buy that the BERL report is a costs curvey only, I’m not obligated to buy the report, which bungled the costs badly. Remember, the BERL report said that alcohol costs New Zealand’s society the equivalent of $4,794m, using an “international framework” that seems to have as its main justification the academic equivalent of a circle-jerk. Burgess and Crampton, employing more mundane economics, came up with a figure of $662m. BERL is yet to explain satisfactorily why their headline figure seems to out by a factor of seven.

That is what I am most interested in. I do hope BERL does a more robust and detailed response than they have to date, so people can then judge with confidence which figure is most useful.

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