Monday, 23 November 2009

Letter in today's Press

My reaction to the Press's weekend editorial ran as lead on today's letters page.

Your editorial of 21 November quoted alcohol-related harm as costing New Zealand some $5 billion per year. As Matt Burgess and I rather painstakingly showed in June of this year, BERL's tabulation of $4.8 billion hinged critically on several assumptions that fall somewhat outside the normal bounds of economic analysis. Most importantly, the figure tallies all costs that drinkers impose on themselves while assuming those drinkers receive zero gross benefit from their consumption. When we applied more standard economic method, we found that the net external cost of harmful alcohol use -- the costs drinkers impose upon others -- roughly matches the total alcohol excise tax take. The $5 billion figure is not a sound measure of any reasonable notion of social cost. Australia's figure, produced using similar method, is equally unsound. I urge you to use more caution in the use of such statistics. After all, shonky-figure-related harm costs the country more than $5 fiffillion per month.


Dr. Eric Crampton
Department of Economics
University of Canterbury

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