Do Costs Matter (Revisited)

By Eric Crampton 26/11/2012

Crikey’s Bernard Keane has been questioning the taxpayer-subsidised anti-alcohol campaign in Oz. And, usefully, he’s drawn a response from Sandra Jones. Let’s have a bit of a look.

In 19 November’s column, Keane looks at the new health paternalists:

There’s little new in all this. Last year, a coalition of preventive health groups demanded the Victorian government move to curb the number of liquor licences. Between trying to reduce the number of alcohol retailers and using taxation to increase the price, the preventive health industry has moved precisely nowhere in over 250 years since the Gin Craze of 18th century England. In what has been called the first drug scare in history, mid-18th century British governments, spurred by an outraged middle class, used exactly the same tactics to attack the prevalence of gin consumption among poorer English people who, it was felt, drank too much and didn’t work hard enough.
It’s fascinating how little the justification for such crackdowns has changed. Attempts to regulate and tax gin out of the reach of poorer people were justified by not merely by moral righteousness but on economic grounds: gin was damaging the capacity of English women to produce children, and consumption of gin caused poverty and idleness in an economy struggling to compete with its European rivals.
The economic justification is no longer couched in such melodramatic terms. Instead, it relies on QALYs — Quality Adjusted Life Years, and AWE-based calculations of lost productivity. But the motivation remains the same: social élites anxious to impose control on what they disapprove of. The big difference now is that nearly all of this is taxpayer-funded: we are paying these élites to rationalise banning, taxing and using surveillance over what they disapprove of.

Michael Thorn and Sandra Jones reply shortly thereafter. The bit that struck me there was their reference to the new Australian report by Marsden Jacob and Associates for FARE. Thorn and Jones write that one reason for increased alcohol regulation is:

Rational thinking: This is not a moral case. There are social, health and economic arguments that fully justify acting to reduce the more than $10 billion a year cost to government. These are tangible alcohol-related police, justice and health care costs that far exceed the $6 billion of alcohol tax collected each year.

They cite the FARE report on this one. It’s interesting for two reasons. Back in September, when I was critical of the Collins & Lapsley figure on alcohol’s social cost in Oz, Sandra Jones seemed to suggest that measured social costs really didn’t matter [my critique was here]:

I think Dr Crampton is missing the point. I for one will not vote for (or against) government policy because the costs of death and suffering have been estimated at $5 billion, any more than I would if they were estimated at $10 billion or $100 billion.

Perhaps Dr Crampton – and the alcohol industry – could spend a little less time arguing the exact calculation of the financial costs of alcohol and think about the real costs. I am sure that every parent who has lost a teenager from alcohol misuse would estimate that single cost at much more that $15 billion.

So the numbers don’t matter, except when they support her.

And, except that the FARE report didn’t find anywhere near a $10b cost to the government, or “alcohol-related police, justice and health care costs” in excess of $6b.

From Table 6 of their report:

Sources of harms to others Total cost of harms 2009/10 $m
Child protection system 694
Effects of drinking of household/family member or friend
– out of pocket 437
– lost time 964
– loss of quality of life 7,703
Theft, burglary 141
Counselling, advice & treatment 113
Property damage 1,673
Loss of life 1,326
Labour costs on others 828
Hospital costs to others 159
Policing & Justice system 1022
TOTAL 15,061

Ok. Police, hospital, counselling, and child protection sum to just under $2 billion. If we add in theft and burglary, and property damage, we can get to $3802 – but most of those costs fall on private third parties, not on government.

There is absolutely no way we can get a $10b cost to the government out of the FARE report. Why? Just look at the table! $9 billion of the $15 billion cited are intangible costs of lost life and lost quality of life. Neither of those are a cost to the government.

And, unless I’m reading it wrong, the $7.7b on lost quality of life is an updating of the figure I’d critiqued last year – the one where  they compared monetized average quality of life differences among those who report knowing a harmful drinker and those who do not, with no adjustment for that the different cohorts might have other relevant differences.

I’ve not gone through the new FARE / Marsden Jacob report in great depth as yet, though as semester’s now finished, that may change. Their numbers on crime are pretty close to what I’d found; on others, we’ve some differences.

Keane responds to Jones and Thorn, pointing out some of the stats showing there to be no particular crisis in Australian alcohol consumption. Things aren’t that different on this side of the ditch.

Sciblogs note: alcohol disclosures.

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