Friday, April 25, 2014

Increasing alcohol excise is great, if you assume the right things

Imagine that hazardous drinkers really really cared about the price of alcohol. If you increased the price of alcohol just a little bit, they'd stop drinking harmfully. Imagine further that moderate drinkers didn't respond very much to prices: what does it matter to the rich Chardonnay-sipping set if a bottle is $8 or $40? If that were the true state of the world, we would have a very simple solution to alcohol problems: hike excise taxes. Harmful drinkers would stop drinking and would stop doing alcohol-related harmful things; moderate drinkers would pay more but that would just be tax revenue for the government. Since they wouldn't change their consumption by very much, deadweight costs would be pretty small relative to the harms avoided. Yay taxes!

Unfortunately, the world don't quite look like that. Our best evidence on it remains Wagenaar's metastudy showing that heavy drinkers respond to a 10% price hike by reducing consumption by 2.8%; average consumption drops by 4.4% with the same price increase. Moderate drinkers respond more to price increases than do heavy drinkers.

Even worse, Byrnes et al show that heavy drinkers' price responsiveness mostly comes from their reductions in drinking on low-drinking days: they basically save up to be able to continue binging on the weekend. So their reduction in consumption is in the part of their consumption that does the least harm. Boo taxes!

Enter the NZ Government report on excise and minimum pricing. Fortunately, the Minister has more sense than her Ministry and hasn't gone ahead with minimum pricing; hopefully, she's not looking at excise. What's the problem with the report? They started by assuming that heavy drinkers are more responsive to prices than are moderate drinkers.

And they know it's wrong. Here, at Table 5, they show the general consensus of the international literature: heavy drinkers don't respond to prices nearly as strongly as do moderate drinkers.

The Wagenaar numbers vary a bit from the -0.44 that I tend to cite as average; I usually go for the weighted measure. Bottom line: heavy drinkers are roughly half as responsive to prices as are moderate drinkers. That's page 20. And they cite Byrnes accurately at page 21.

But then what do they go and do? They started by trying to get SHORE to estimate NZ elasticities, but something went wrong there: the elasticities were completely out of whack with reality. Reading between the lines at page 25, it looks like SHORE was using the increase in purchases of products on special at supermarkets as part of its price elasticity estimation, and that just ain't right. If you switch brands because something's on special and buy more of it than you otherwise would have, that isn't the same effect as you'd expect for across-the-board price changes you get with excise or minimum pricing.

As the report rather bluntly puts it:
"It was decided that the significant reductions in consumption estimated using NZ elasticity estimates are not a realistic representation of what is likely to happen in reality and are contrary to all international evidence of the responsiveness of alcohol consumers to changes in price."
Rather than discard the completely nuts NZ numbers, they let those figures stand and added alternative numbers as robustness checks. Those big headline estimates you've been seeing in the papers about just how awesome excise is? They're based on the numbers that, according to the report, "are not a realistic representation in reality and are contrary to all international evidence of the responsiveness of alcohol consumers to changes in price."

Example? A 133% excise hike means about a 40% increase in the cost of low-priced beer, a 44% increase in the cost of low-priced wine, a 45% increase in the cost of low-priced RTDs, and a 103% increase in the price of low-cost spirits. The heavy drinkers SHORE estimated a 61% reduction in harmful consumers' consumption with that tax hike. So they're saying that harmful consumers are more than unit elastic. That's just not right.

The other problem with the SHORE numbers is that they couldn't distinguish between heavy and moderate drinkers. Everybody's elasticity was equally overestimated.

Because those numbers were so out of whack, they also ported in some Sheffield elasticity estimates from the UK. Problem with those estimates is that, while they're about right on average, they've messed up the relative elasticities: they have harmful drinkers being more price responsive than moderate drinkers. I'm not sure why they didn't pull in the 2008 Sheffield estimates noted at Table 5. At Table 25 they say, using Sheffield, that a 133% excise increase would reduce low risk consumption by 18.6% while reducing harmful consumption by 21%. If that 133% excise increase corresponds to about a 45% price increase, then Wagenaar's estimates would say we'd get only a 12.6% decrease in heavy consumption and a 28% decrease in moderate drinkers' consumption (using the figures from Table 5). Heavy drinkers' real-world price responsiveness is 60% of that advertised, while moderate drinkers' responsiveness is 150% of their figures.

Now, why does this matter? The more responsive are moderate drinkers to price measures as compared to heavy drinkers, the more expensive is any bit of harm reduction in terms of harms imposed on moderate drinkers. And the folks who wrote the report know this matters too! Here's what they wrote at page 85:
Overall it appears that excise increases have a greater impact on harmful drinkers than low risk drinkers, based on University of Sheffield elasticity estimates. This is driven by the greater own-price elasticities, particularly for spirits. However, this result is inconsistent with findings in studies such as Wagenaar et al (2009), which found that heavy drinkers are much less responsive to price changes (with an elasticity of -0.28 compared to -0.62 for all drinkers). The University of Sheffield also found that harmful drinkers are much more price inelastic compared to low risk drinkers when total alcohol consumption was considered, rather than consumption by beverage type.
We also do not have separate elasticities for per occasion drinking, and recent evidence indicates that people are much less price responsive during drinking occasions (Byrnes et al, 2012). Therefore there is a risk that the effects on purchases could have been over-estimated for per occasion purchases. 
Therefore we cannot conclude with confidence that excise increases will have a greater impact on harmful drinkers. More research is needed to confirm this, which could be done once revised University of Sheffield elasticity estimates are available.
Here are but a few of the the ways this will affect their analysis:

  • Crime reduction benefits are overestimated both because heavy drinkers are modelled as being far more price responsive than they really are and because crime seems more responsive to binge drinking than to longer term heavy drinking, and it's the latter that seems more affected than the former among heavy drinkers. 
  • The health effects will be overestimated where harmful drinkers are modelled as sharply curtailing consumption and where we underestimate by how much moderate drinkers shift into non-drinking and miss out on the health benefits of moderate drinking.
  • The deadweight costs facing moderate consumers are underestimated in the Sheffield figures that understate moderate drinkers' consumption elasticity.
  • All the other benefits that require consumption reductions among heavy drinkers will also be overstated.
Tables 40 and 41 have a whole whack of sensitivity checks. What if population growth is lower or higher? What if we use a higher or lower discount rate? Nowhere in the 21 sensitivity analyses is the one that really matters: "What if we use a sane, international-consensus measure of relative price elasticities?"

Whether this is enough to overturn their net benefits finding - I can't tell without a pretty extensive bit of work. Just linear extrapolations from the changes in harmful and moderate consumption won't do it: deadweight costs will increase extraproportionately, and harms are likely exponential in heavy consumption.* But I'm pretty sure that Collins was dead right in not relying on this stuff to justify imposing minimum pricing: the case hasn't been made. 

A few other potential problems on a cursory reading:
  • They estimate the productivity costs of those showing up to work with hangovers under the assumption that those prone to showing up to work with hangovers have average productivity characteristics but for their propensity to show up for work with hangovers. I rather suspect that less conscientious workers are more prone to showing up unfit for duty, and that this affects more than just hangovers.
  • They estimate the productivity costs of taking a day off for a hangover under the assumption that the kinds of people who take a sickie for a hangover wouldn't have used up that free sick day for some other recreational purpose later in the year. This also seems implausible. 
  • Their analysis of alcohol-related unemployment is bereft of consideration of comorbidity between alcoholism and depression and the independent effect of underlying characteristics on employment.
  • Frictional costs to employers of replacing fired or deceased workers seem predicated on an assumption that the employer would never otherwise have to have replaced that worker.
  • Their crime estimates count as an alcohol-caused crime any crime committed by someone arrested within 12 hours of offending and presenting as at least moderately intoxicated. While this may underestimate things by excluding those who aren't caught until much later, it also says that every one of those moderately intoxicated arrestees would never have committed the offence but for the alcohol. Not sure which way things will cut on that one, but I'm awfully sure that they'd do better by just porting in some decent estimates of the elasticity of crime with respect to alcohol out of something like Carpenter. 

I'll be interested to see what they come up with when they have a second go at this, with some sane elasticity figures. 

On the plus side, Footnote 31 points to my blog post on likely effects of minimum prices on producers. I'd have recommended this one instead.

* At Table 37, they give a $268,185,000 cost of a 133% excise hike. If moderate consumers are 150% as responsive as they're reckoning, then a linearisation would put that cost up to $402 million. At Table 30, they give a value of harm reduction in Year 1 of $740,344,000. If heavy consumers are only 60% as price responsive as they're reckoning and if harms were linear, that knocks the benefits down to $444m. So we're down to a net benefit of about $40 million, without considering that deadweight costs will be higher than implied by linearisation, and without considering the other problems noted above. Whether the linearisation on harms here overstates or understates things gets complicated: for any individual drinker, harms are strongly non-linear, so if we had a pile of really really heavy drinkers estimated to become moderate drinkers, but instead only become heavy drinkers, then my linearisation overestimates how much the report overstates harm reduction: the reduction in harm in moving from really really heavy drinking to heavy drinking is bigger than the reduction in harm from moving from heavy to moderate drinking. But if instead we get the harm reduction from greater proportions of heavy drinkers shifting into moderate drinkers than really would, then the linearisation would be about right. And if prices are really bad at hitting acute drinking that contributes most greatly to harms, then even my linearisation understates the extent to which the report overstates harm reduction. It's complicated, and I haven't access to the guts of this machine. 

On Stillman SHOREs

So, did reducing NZ's alcohol purchase age really hike youth accident rates? SHORE says so:
Now, in the first long-term study, Massey University researchers Dr Taisia Huckle and Karl Parker have found this increased risk has become the new normal.
In the years leading up to the change, drivers aged 18 or 19 had roughly the same chances as those aged 20 to 24 of having an "alcohol-involved" vehicle crash that caused injury or death.
That increased in the years following the change, putting the younger drivers at 15 per cent greater risk in the first six years, then at 21 per cent greater risk up to 2010.
Loyal readers will recall Steve Stillman's work with Stefan Boes showing the opposite: they concluded that there was no increase in crash risk for 18 and 19 year olds after the purchase age change.

So why the difference?

First, the two studies are looking at different things. Huckle et al at SHORE use the ratio of alcohol-involved to non-alcohol crashes as dependent variable. They argue that this helps to control for the rate of non-alcohol-related crashes. They look at how this ratio for 18-19 year olds changes as compared to the similar ratio for older cohorts after the crash. If the ratio increases, that's potentially a form of difference-in-difference analysis that says something about the effects of the law change. They found that the ratio increased for youths relative to older cohorts.

Stillman and Boes instead looked at the number of alcohol-related crashes among 18-19 year olds as compared to alcohol-related crashes among older cohorts. They found no increase in the number of alcohol-related crashes for youths relative to adults once you put in appropriate time trends.

One problem with using ratios as dependent variable, and especially when you're using it in difference-in-difference comparison to another ratio, is that you can't easily tell whether any significant effect of the intervention was due to changes in alcohol-related youth accidents, non-alcohol-related youth accidents, alcohol-related adult accidents, or non-alcohol-related adult accidents. If non-alcohol-related accidents changed for other reasons around the time of the policy change, and if youths responded to that differently than adults, then that could have driven results.

Because the ratio measure isn't clean, it's then harder to talk about the "risk" of an alcohol-involved crash for youths subsequent to the change. You could say that the ratio has changed, but it's hard to say why. Stillman's paper pretty clearly shows that the "why" wasn't an increase in alcohol-involved accidents among 18-19 year olds.

Further, and as Thomas Lumley points out, while the paper says there was no effect on fatalities, each tragic anecdote in the Herald piece involved a fatality; the Herald story nowhere mentioned that SHORE found nothing on fatalities. The SHORE paper said "Lowering the purchase age had no impact on fatal alcohol-involved crashes among drivers aged 18 to 19 years compared with drivers aged 20 to 24 years." I'm a bit curious why the Herald then chose to lead with "Lowering the alcohol purchase age has been linked to a long-term increase in the chance of drunk drivers aged 18 or 19 being involved in car crashes that cause death or injury."

"There’s more to neoliberal hegemony than loss-leader pricing, but as ideological combatants those people know what they’re doing."

Scott McLemee at Crooked Timber tells us that Lawrence & Wishart, publishers of the Marx-Engels Collected Works, are issuing take-down notices to the Marxist Internet Archive for their translations of Marx and Engels; other translations will stay there. Writes McLemee:
Chances are the archive volunteers never contacted the press before putting the material up because they assumed, reasonably enough, that an edition prepared largely if not entirely with the support of old-fashioned, Soviet-era Moscow gold was not anybody’s private intellectual property—that the works of Marx and Engels now belong to the commons. They just want people to be able to read Marx and Engels.
...
About the time the Marxist Internet Archive announced that it would be taking down all theMECW material, Corey and I both, by coincidence, were ourselves of radically under-priced materials from the enemy’s publishing apparatus. He’d received an order containing dirt-cheap copies of Bastiat from the Liberty Fund, while a day earlier I had downloaded free digital editions of the major Austrian School books on theory of value and the socialist-calculation debate from the Mises Institute website. There’s more to neoliberal hegemony than loss-leader pricing, but as ideological combatants those people know what they’re doing.
One side of the war of ideas recognizes the value of supplying free ammunition to its allies. The other side will charge its own side for each bullet. Interesting which side's chosen which strategy. The interested reader can also find all three volumes of Das Kapital at Liberty Fund.

If you've not perused the Online Library of Liberty, or Mises.org's extensive selection, they're both well work a browse. All it will cost you is your time. 

Thursday, April 24, 2014

Surprising irreligiosity

Fifty-five percent of the people in my neighbourhood have no religion, while thirty-nine percent identify as Christian. My daughter's Jedi status I guess is part of the remaining 6%.

The Christchurch Press puts up the map, though I'm not sure whether the map is theirs or comes from elsewhere; the GoogleDoc has "attribution unknown". As it's from a Google Doc, I've embedded it below.

 

I didn't know that you could have Google do this kind of thing; it's amazing. Were I not a bit swamped with other projects, it would be really rather fun to copy the spreadsheet and add in columns for income, education and ethnicity. I was surprised to see that the east side of Christchurch was so irreligious; the usual stereotype has places with strong Pacific island migrant communities, like Aranui, being pretty religious. But Christchurch's godly folks live out West in the richer parts of town like Fendalton. It would also be neat to overlay changes from 2006 to 2013 with relative earthquake damage.

Wednesday, April 23, 2014

Birthdays

American kids tend to be born June through September. I'd thought this was generally due to parents planning to hit a September school enrolment cut-off day: in many US states, if your child turns 5 at or before the start of school in September, the kid's enrolled; otherwise, you've got another year of daycare to worry about. Buckles and Hungerman showed that seasonality in births is due to deliberate timing: women who were trying to conceive showed strong seasonality, while those for whom births were unexpected showed no seasonality.

In New Zealand, your child starts school on the fifth birthday. If the child is born before a cut-off date (end-March, but later at most schools), he or she will start straight into Year 1. If the birthday is later in the year, the kid starts in Year 0 then either progresses to Year 1 at the start of the new school year in February, or continues in Year 0 until ready for Year 1. 

Incentives facing Kiwi parents are then a bit different. Since your kid is in school on the fifth birthday no matter what, you don't have to worry about hitting that barrier. But you might want to avoid a protracted stay in Year 0 unless you want your child to be old for his class. If you want to have your kid start straight into Year 1, you'd time your birth for the Kiwi summer or autumn; if you want your kid to start in Year 0 and dominate his later classmates on the rugby pitch, you'd time it for a spring Year 0 start. 

StatsNZ today put up a table showing the most common birthdays and linked to a great visualisation of the US data. In both cases, the heatmap shows the frequency of particular birth dates.

Here's the US:


And NZ:


 
Where Americans tend to be born June-September, Kiwi births cluster September-October. Those kids would get a short start in Year 0 before progressing to Year 1 when school starts in February. 

We hadn't really considered school timing when beginning the Ira and Eleanor production processes. I expect that the Kiwi data reflects deliberate timing decisions like those found in the US. I'm just a bit curious what's underlying those decisions. Kiwis avoid June the same way that Americans avoid January, but the only sense I can make for Kiwi preferences for spring over fall is differences in school timing. But there are disadvantages to being part of the cluster. Maternity wards have only so much capacity. If you're giving birth at the same time as everybody else, you're likely going to be pushed home rather more quickly than you'd like.

Pointers to the relevant literature, or Kiwi common knowledge, are welcome.

Monday, April 21, 2014

Social costs of Easter

It's not just how much chocolate we're eating, it's how we're getting our Easter eggs. From the Herald:
The Egg Day Out was held across three locations in Auckland on Good Friday. It was organised by the Equippers church and sponsored by Cadbury. A thousand eggs were to be dropped at each location from a helicopter for children to "hunt" and gather. All went to plan at the city and North Shore locations but in Manukau at the Vodafone Events Centre air traffic control prevented the chopper from flying over the site and the eggs were scattered by hand.

Equippers pastor Wilhem Schaafhausen told the Herald he had expected up to 5000 people to attend at each site, but on the day about 30,000 showed up. He said one of the problems at the event was the behaviour of many parents.

"A lot of kids were getting hurt ... parents were just running in and running over the kids. I was like 'oh my goodness' and my volunteers were blown away by the behaviour of the parents," he said.

...They described other parents as greedy and abusive and said they were trying to get as many eggs as possible. Yvonne Pokotai-Ratana took her daughters to the event with some friends and their own kids. She said an adult set upon her younger daughter Yves to take any eggs she had collected.

"There was a point where the adults weren't allowed to access beyond, only the children. But arrogant adults ignored the commentator," she told the Herald.

"When the egg drop started the crowd of kids and adults rushed up the hill - most of whom I saw were adults being rough to others around them just to get the Easter eggs. My 7-year-old's face was scratched by an adult and she didn't even have an egg. Other children walking past were crying or even hurt."

A woman posted on the Facebook page that she ended up in the accident and emergency department with her young son after an incident at the event.

"Thanks for the A&E visit for my 3-year-old [after] getting pushed by adults and his fingers getting trampled on after egg ripped out of his hand," she wrote to organisers.
We know that chocolate is addictive. And look at the lengths to which even adults will go when chocolate-crazed. Events like this encourage precisely this kind of behaviour: a chocolate free-for-all. Clearly we need to ban free-chocolate events. But that isn't enough. Our obesity problems combined with this kind of mayhem point strongly towards tougher regulations on access to chocolate and chocolate minimum pricing. We need many hundred-thousand-dollar grants to the University of Otago's and University of Auckland's public health departments examining binge chocolate eating. They'll surely find that we're in a deep crisis and that More Must Be Done. We could establish Chocolate Healthwatch to send out anti-chocolate press releases every Easter and Halloween.

Or maybe we could instead start recognizing that there are just some real jerks out there and deal with the more general jerk problem. It would be ridiculous to start some anti-chocolate campaign on the basis of this weekend's event; it would be rather more appropriate to have parents go through their videos of the event, find the adults who were behaving like this, put their pictures up everywhere, and shame them for their loutish, awful behaviour. Would that we could take an individual responsibility approach more broadly.

Coordination failure?

Despite Kiwi secularism, New Zealand still has odd rules around shops and bars being open on Good Friday and Easter Sunday. But, if there's a special event on, you're supposed to be able to get a special licence to keep your bar open.

Warbirds Over Wanaka comes to Wanaka every other year. Fifty thousand showed up in Wanaka (population 7000) to watch the airshow. It's a pretty big deal for Wanaka. You might even think it would count as a special event.
Disappointed Wanaka bar operators have been given a resounding ''no'' to requests for special liquor licences at Easter, leaving a 50,000-strong Warbirds Over Wanaka airshow crowd with nowhere to drink in the resort unless they are dining.
The Queenstown Lakes District Licensing Committee refused special licence applications for Good Friday and Easter Sunday from eight Wanaka bars and one Queenstown bar at hearings in Frankton on Monday and Wanaka yesterday.
The applications had been opposed by Public Health South medical officer of health Dr Derek Bell and Sergeant Linda Stevens, of Queenstown police, who said despite claims to the contrary, the bars were essentially proposing ''business as usual'', not genuine events as required for special licences under the Sale and Supply of Alcohol Act 2012.
Fifty thousand people showing up wasn't enough for it to count as a special event; apparently, had the bars coordinated with Warbirds to have plane-themed stuff going on at the bars, they could have opened for the weekend.
Post Office Lane bars manager Tom Wild said Wanaka businesses relied heavily on seasonal trends, particularly Easter, which came immediately before a long, quiet shoulder season.
Warbirds provided an opportunity for bars to ''showcase'' Wanaka as an attractive tourist destination to the thousands of visitors in the area.
However, because people wanting a night out would be denied that option and restaurants allowed to trade would struggle to cope with the huge numbers, visitors were likely to form a negative opinion of their time in Wanaka, Mr Wild said.
It seemed inconsistent that Post Office Lane bars Woody's and Barluga had been granted special licences during the 2012 Warbirds, when there was ''substantially less'' entertainment than the three-day ticketed music event proposed this Easter, he added.
The rationale?
Wanaka bars had tried to ''dress up'' their applications as separate events to cater for the large Warbirds crowd, yet in reality, there would be ''no significant differences'' in the food, drinks, ambience and music provided at those events compared with regular trading days.
Evidence for that could be found in the ''dulling sameness'' of the applications, the intention to trade for a large part of the prohibited days rather than a ''gentle intrusion'', the lack of significant entry fees for the bars' proposed events and the fact licensees had made no attempts to co-ordinate with Warbirds' organisers.
Bar operators had two years between each airshow to plan a complementary event and Mr Unwin hoped for a ''much more significant form of co-operation so there will be an event within the event'' in future.
So, by whim of retired judge Bill Unwin, if next time around the applications are more interesting and don't suffer from "dulling sameness", maybe the bars will be allowed to open. Or maybe they won't. The bar owners don't get to try to figure out what kind of thing customers might want during Warbirds; Unwin gets to. Great system.

Meanwhile, in Christchurch, co-blogger Seamus Hogan timed his garden shopping to allow for civil disobedience:

The Cramptons instead spent Easter in the pools at Hamner Springs. Note that the green waterslide can be very fast indeed.