Friday, 17 July 2009

More from the NBR on the infamous BERL report (Updated)

The National Business Review has a story, by Mitchell Hall, in its print edition (can't find it online) on the battle between Matt Burgess and Eric Crampton (amateur, untrained, unqualified blogger?) and BERL on the social costs of alcohol. A nice point that the article makes is a list of yet to be justified assumptions that BERL makes to get to their headline figure. Hall writes,
"Rather than continue to assume without any justification every major component of their headline figures, as BerI appears content to do, we would have expected these economic consultants to mount a defence in economics," the pair [Burgess and Crampton] challenged.

They argued that Berl hadstill not justified, or been able to cite formal theory or evidence in support of some aspects of the report, and contended that these assumptions produced over 90% of Berl's headline costs. Those assumptions were:
  • all harmful drinkers are irrational;
  • all irrational drinkers receive zero gross economic benefit from all drinking, both above and below the threshold for harmful drinking (therefore all private costs are social costs);
  • an epidemiological threshold determines the cutoff point for alI economic benefits;
  • in the counterfactual, all harmful drinkers are perfect complements for capital and are irreplaceable;
  • other than differences in age and gender, prisoners have the same characteristics as an average member of the population;
  • other than differences in age and gender, heavy drinkers would have the same characteristics as an average member of the population but for their drinking;
  • using average population values and ignoring most cohort characteristics of heavy drinkers and prisoners; and
  • up to 50% of social costs of harmful drinking are potentially avoidable.
It would be good to see BERL address these issues directly. There is more to the differences between BERL and Burgess and Crampton than just different "world views".

Update: I'm behind the play, Eric Crampton blogs on the NBR article here.

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