A symposium, of sorts

The latest issue of the New Zealand Medical Journal features three papers on alcohol policy, including one from Matt Burgess, Brad Taylor and me, along with a commissioned editorial piece on the set. I have not yet had a chance to read the other two papers in the series but the editor of the journal kindly forwarded along a copy of the editorial piece late Thursday night.

Doug Sellman, lead author on the editorial piece, says about what I expected he would say about our work on alcohol.

Our piece in the NZMJ contrasts the standard economic approach to costs and benefits with that employed by BERL in their work. We worked through the different cost categories in the BERL report to illustrate the differences between a standard economic approach and the cost of illness method they used before spending a bit of time on the importance of marginal analysis rather than measuring total benefits and total costs of anything.

Sellman's piece, or at least the part of it criticising us rather than lauding the other two papers, begins with* a critique of our focus on external costs rather than costs borne by drinkers themselves; he pitches this as being responsible for the $4 billion difference in measured cost. I would note here that about a billion and a half of that $4 billion difference comes from BERL having double-counted intangible costs of statistical lives lost with forgone earnings. Even if your focus were entirely on total costs, there's a big chunk of that total figure that's just wrong.

I'm also not sure if he's amplifying for rhetorical effect, didn't understand the point, or whether we didn't phrase it clearly enough. But he writes:

The narrowness of the Crampton group’s approach is exemplified in the statement that “the only policy-relevant costs [of a fatal drink driver accident] are those imposed on emergency services in responding to the accident”. Equally the lost productivity through mortality reveals the dismal view from the world of this particular economic approach: early death is not seen as a cost because the economic unit (the deceased person) can simply be replaced.

In the case of drink driving accidents, we were very clear that deaths to those outside of the drinker's vehicle impose very large costs that are definitely deemed external and policy relevant. But if you were considering a single vehicle accident with a solo driver where nobody else was hurt and only the driver's own car was wrecked, then we would only count the costs to emergency services. There costs of deaths associated with that kind of crash remain very real, but if you want to count them, you have to also count the benefits enjoyed by those who took similar risk and didn't have an accident.

Similarly, Doug doesn't quite get why we discounted costs of forgone output. BERL used a measure of GDP per capita as forgone output rather than using the deceased worker's prior wages; that addition requires very strong assumptions around worker irreplaceability and capital-labour complementarity. But the main reasons we discounted lost output were first that it's double-counted with the intangible costs of lives lost, so it should be reduced even if you want to count private costs, and second because it's largely a cost borne by the drinker himself.

But here's my very favourite paragraph in the whole thing.

From a non-economist standpoint Crampton et al would appear to be the fundamentalists in this debate and their conclusions need to also be considered in the context of their receiving funds from an alcohol industry, which benefits from their conclusions. Further, it is important to note that “standard (neoclassical) economic approaches” are coming under increasing scrutiny and criticism, particularly following the recent global financial crisis, which was not predicted by “standard” economic models. New economic models based on better science and more rigorous mathematics are now progressing.5 [cite to Keen!]

I'm pretty sure that these can't all be true at once:

1. I'm a fundamentalist
2. I'm bought out by industry, saying whatever they want
3. We should throw out neoclassical economics because it yields conclusions like mine and the financial crisis too.

I suppose 1 and 3 could go together if I'm a fundamentalist economist. But the thing is, you can't really buy out a fundamentalist. A true zealot can be encouraged to spend more time on one area of work rather than another [and a consultancy contract that needs to get finished, earthquakes or not, does sharpen incentives on that front], but you can't buy a fundamentalist's conclusions. It's perhaps worth noting, again, that the net effect of industry funding on conclusions, when it comes to my analysis of the BERL study, was to substantially increase the measured external costs of alcohol use: thoroughly understanding the model on which the BERL study was based led us to find an error in our prior unfunded work - one not noted either by BERL or by Marsden Jacob in its $60k hatchet job on that prior piece.

* Actually, it begins with Doug making a trivial but risky error: he says that BERL produced its report for the Law Commission's review of the alcohol literature. I understand that the Law Commission, back in 2009, sent out a couple of threatening letters when they were characterised as having commissioned the BERL report. I doubt it'll happen here, because LC isn't being criticized (incorrectly) for having commissioned a shonky report. They didn't commission a shonky report; the Ministry of Health and ACC did. The Law Commission relied on a shonky report. That's different.