Berl, the booze bill and a backdown

Because boozing is among his favourite activities (he prefers to call it networking), Alf has been interested in the brouhaha over a study by Berl.

The NBR kicked it off, at least in terms of news media coverage, and Business Roundtable executive director Roger Kerr today gets in on the act in the NZ Herald.

Kerr says –

Academics Eric Crampton of the University of Canterbury and Matt Burgess of Victoria University have performed a huge public service (not commissioned by any outside party) by exposing the flaws in a study of the social costs of alcohol.

The study was undertaken for the Ministry of Health and ACC by Business and Economic Research Ltd (Berl). It was cited approvingly by Sir Geoffrey Palmer, SC, president of the Law Commission, in a speech relating to the liquor review which the commission is undertaking.

Berl calculated the annual social costs of alcohol to be around $4.8 billion. Crampton and Burgess show that this is a gross over-estimate.

Much of the critique is technical, focusing on the erroneous assumptions and methodology of the Berl study.

Among other objections, Kerr points out that Berl has ignored the benefits to consumers of alcohol consumption.

These benefits are not the savings in public expenditure on healthcare due to moderate consumption, which have been documented in medical research. These are external benefits.

Rather, they are simply the benefits people derive from the enjoyment of alcohol, and are approximated by what they are willing to pay for alcohol products.

The Berl report should not have passed the smell test at the Law Commission. It is well known that some past studies have made similar mistakes.

Crampton and Burgess state that “The Berl report is wholly inadequate for use in assisting policy development”.

Others have similarly put the boot into Berl, and Alf would have done so too – perhaps by raising a question in the House.

But he backed off when alerted to the fact that Berl had been briefed to examine only the costs side of the argument.

Weighing up the benefits was not part of the job.

Treasury big-wig Peter Bushnell lambasted Berl, too, for the quality of its work. He has since had the good grace to apologise to the firm.

Curiously, this apology is not mentioned by Kerr when he says –

A senior Treasury official has rightly commented that the Law Commission’s reputation is at risk if it relies on it. Unless Berl can refute significant criticisms, the chief executives of the Ministry of Health and ACC should also be held accountable for such a poor use of $135,500 of taxpayers’ money. Indeed they should be demanding their money back.

Fellow bloggers (including some of Alf’s favourites) have clambered in, too.

Not PC referred to

BERL’s now disgraced report on “the social costs” of alcohol use “is work that doesn’t look like it meets the ‘normal standards you would expect’,” says Deputy Secretary of the Treasury Dr Peter Bushnell. “I can see the point being made in the article – it looks pretty shonky.”

Bushnell of the Treasury is essentially agreeing with the demolition of BERL’s report by Eric Crampton of Canterbury University and Matt Burgess of Victoria…

And Eric Crampton reckons the problems with this BERL report belie a more general problem with economic consultancy reports, “in that there needs to be somebody looking at the Requests For Proposals (RFPs) that a ministry sends out, and checking the results when they come in.”

Not PC observed that Berl had not yet commented “on Treasury’s bollocking of their work” although BERL chief economist Ganesh Nana had said the firm stands by its report.

At Berl’s web-site (which Not PC presumably has not visited) we get the whiff of another side to the story under the heading BERL accepts Treasury apology

It has been reported that Treasury has made some critical comments about our report into the Costs of Harmful Alcohol and Other Drugs Use.

BERL Managing Director Kel Sanderson says that he is pleased to accept an apology from the Treasury with respect to these criticisms.

The letter received from Treasury Deputy Secretary, Dr Peter Bushnell, on Friday 03 July states:

“My comments were in response to second hand information and as a result I made criticisms of the BERL research that, with hindsight, I would not have otherwise made.

I accept that the BERL research is not a full cost/benefit study and regret that the media coverage didn’t adequately convey that BERL worked to a specific brief to research only the costs of harmful alcohol and other drug use.

I recognise that this new media attention has placed BERL in a difficult position and apologise for the part that my reported comments played in this situation.”

A copy of the full letter can be viewed at Berl’s web-site.

Doesn’t this put the excoriation of Berl’s work in a somewhat different light?

Whatever the costs of liquor to the nation, however, none of this will temper Alf’s habits or his urge to go networking. His disposition improves significantly with each dram.

He does not know how to quantify those benefits in dollar terms. Perhaps Berl could do it for him.

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