Thursday 4 December 2014

Cost-benefit analysis and the new drink-driving limit

NewstalkZB asked me Monday morning to comment on the new .05 drink driving limit.

I noted that it is likely to prevent some crashes, but that I did worry about whether it was worth the cost. The cost-benefit analysis that formed the background to the RIS wasn't bad, but did have a few things that gave cause for concern.

Here's the table of behavioural assumptions that fed into the cost-benefit analysis.

They expect that 94% of drivers who are currently drinking to less than the .05 level will have no change in behaviour, 2.4% will take alternative transport, 2.4% will switch to drinking at home, and 1.2% will flip to drinking to less than a .03 level. 

While there's been a lot of media play on how much you can drink while staying under the .08 limit, and that's up to 8 standard drinks for an 85 kg male on a 2-hour window, that's not the safe limit. Rather, it's how much you can drink and have a 50/50 chance of being nailed for drunk driving. See table 3, here

A half litre of Renaissance Stonecutter Scotch Ale is 2.8 standard drinks. Three half-pints in a two-hour window, 4.77 standard drinks, is safe for an 85 kg male at the .08 limit but not safe at the .05 limit. At the .05 limit, the "safe" level is just over one pint per two hours. For a 55 kg male, even a half-litre is unsafe because the safe threshold is 2.5 standard drinks.

It consequently seems pretty implausible to me that we wouldn't have more substantial changes in behaviour than those here assumed. While that might have some consequent improvement in accident reduction, the effects on consumer surplus will be rather more substantial. The risk-averse will be targeting .03 to avoid hitting .05 and consequent penalties.

Their mid-range estimate has the 10-year aggregate loss in consumer surplus at $900,000 for the whole country. That's around $130,000 per year if they applied an 8% discount rate, or $2500 in lost consumer surplus, per weekend, for the whole country, assuming that all drinking is done on the weekend. It just doesn't seem plausible. I'd be willing to pay $100 per year to be able to stick with .08 instead of .05, which would let me keep aiming at .05 rather than having to target .03. If there are at least 1300 people like me, across the whole country, then they've messed up the consumer surplus calculations substantially. In a country of 4 million and change, well...

It'll be interesting to see how this plays out, not only in the accident stats, but also in patronage at after-work functions and at rural pubs.


  1. $130,000 annually seems implausible to me too. I'll go from two wines to one. But, except on a lunchtime get-together, that doesn't seem very appealing so perhaps I'll just flag it. Restaurants will probably be hardest hit.
    On a different but related note, it'll be interesting to see if more morning patrols are set up. I'd suggest that is where a lot more people will fall foul of the new lower limit (from previous night's drinking.)

  2. I'm sure you are right that many people who currently have two drinks won't think it worthwhile to go out for just the one.

    And that a large proportion of the people who fall foul of the new law will be caught on the morning after. I don't know how it is in NZ, but in the UK the authorities tend to downplay this because, unless you tell people to drink nothing in the evening if driving the following morning, it involves giving them information to be able to roughly calculate alcohol level vs. time.

  3. It's worth pointing out that the penalties for getting caught are significantly lower with the lower alcohol limit. If you drive over .08, you still get criminal charges and a licence suspension, as at the moment.

    But if you get caught driving between .05 and .08, you only get an infringement notice (like a speeding ticket). That's $200 and 50 demerits (100 demerits is what it takes to lose your licence).

    For drivers who have >= 50 demerits already, that's still a big deal since you lose your licence, but if you don't, it seems unlikely that your willingness to pay is going to be that much greater than $200 per occasion you get caught.

    Multiply the whole thing by the small odds of getting breathalyzed, and then by the moderate odds that you actually turn out to be over the limit. It could be well under $100/year/person.

    There's more to it than that: you might put some value on reducing your anxiety in the minute or so between first seeing the cops and getting the test result. You might also value the fact that once the ticket is issued, you'd be closer to losing your licence, and then you'd be in the position of needing to be more careful (particularly if you get to 90 points, where even a small speeding ticket would lose you your licence).

    That said, if you put a value that sort of thing, you'd need to start valuing the emotional benefits everyone gets from knowing that the average driver isn't quite as drunk, and that there's a bunch of other people who are driving more carefully because they're 50 demerits closer to losing their licence than they would otherwise have been.

  4. Thanks.

    I'll note two things.

    First off, MoT's VSL estimates are inclusive of all death from accident costs including presumably apprehensions of death among others. Add it in specifically here and not on other transport options like lane straightening and you put a thumb on the scales.

    Second, the infringement isn't trivial for law abiding types. There is shame in having to abandon your car because police said so.