Eric Crampton writes:
Fans of the classic Australian political satire The Hollowmen will remember the standard trick for inflating a figure when doing political math: roll together several years’ expenditures to get a bigger number.
A smallish-sounding $10 million spending announcement, rolled up over 10 years, becomes $100 million. As an official on The Hollowmen warned, “Treasury hate it. Might get you some headlines, but who needs that?”
The past fortnight brought a lot of headline stories about the social cost of alcohol. Felix Desmarais’ article for the Dominion Post warned that alcohol costs $5 billion. The Herald‘s headline warned of a “$70b social cost”, citing Alcohol Action New Zealand’s rolling up 10 years’ worth of alleged costs.
Wow so the cost of alcohol is around a third of NZ’s GDP. My God, let’s ban it and we’ll be so much better off.
When considering health costs, BERL explicitly wiped out any conditions where alcohol reduces net health costs. They worked from the alcohol aetiological tables listing the proportions of every disorder that might be attributed to alcohol. For alcohol-related liver cirrhosis, the proportion is obviously 100 per cent. But for other disorders, like chronic heart disease, the proportion is negative because alcohol reduces heart disease.For any disorder where alcohol provides those protective effects, BERL assumed away those benefits.
So this “cost” is ignoring all benefits. It is basically meaningless.
When BERL tried to estimate the costs of alcohol-related crime, they used a survey of prisoners who were asked to what extent alcohol had contributed to their offending. If the prisoner said at least “some”, the costs of that offending were entirely attributed to alcohol.
BERL’s estimates were also plagued by double-counting. If you follow standard guidelines, you cannot count both the intangible costs of premature mortality and the costs of lost productivity due to premature mortality. New Zealand’s standard measure of the cost of premature mortality already includes all associated costs, including lost productivity. BERL added up both.
It is almost like they were trying to get as big a number as possible.
Last year, BERL came back to argue that alcohol costs the nation $7.8b per year, or $1635 per capita. The number appeared to be an inflation adjustment to the old 2009 figure; but I thought it worth checking. BERL’s Ganesh Nana confirms that the figure is an update of the old $4.9b, inflated by GDP growth since then. Our best hope of reducing alcohol’s social cost, by that measure, is a very sharp recession.
The Hollowmen thought they were teaching us how to build a big number. They had nothing on BERL. We should all know better than to take their new number seriously.
So now you multiple the so called cost of alcohol by GDP growth. Really it is genius work they do.