Crampton and Burgess on the BERL Report

Eric Crampton and Matt Burgess have a new working paper savaging the methodology of the BERL report (Press release here, Eric’s previous blog posts on the report here). The Abstract:

In March 2009, Business and Economic Research Limited (“BERL”) published “Costs of Harmful Alcohol and Other Drug Use,” a report jointly commissioned by the Ministry of Health and ACC. BERL was asked to measure the costs of drug and alcohol abuse to New Zealand society, but not to evaluate specific interventions. BERL calculated annual social costs of alcohol and illicit drug consumption of $6.8 billion, including $4.8 billion in social costs from alcohol alone. The report was cited by Law Commission President Sir Geoffrey Palmer as evidence in support of greater regulation, gaining considerable media coverage.

We find substantial flaws in BERL’s method that together account for well over 90% of BERL’s calculated costs of alcohol use. Corrected external costs of alcohol use amount to $662 million and are roughly matched by the $516 million collected in alcohol excise taxes. The BERL report is wholly inadequate for use in assisting policy development.

The concluding paragraph:

A year-long study commissioned by the Ministry of Health and the ACC at a cost of over$135,000 must surely have some purpose. We leave it to readers to consider what that purpose might be.

Heh.

I would be willing to bet that proponents of increased taxation and regulation will keep citing BERL’s horribly inflated social cost estimate as support for their preferred policies, despite its demonstrable worthlessness. It’s easy to point to a Scientific Study which says that the social costs of alcohol are huge, and must be addressed. It’s much harder for most people to see what’s wrong with the study without spending a whole lot of time looking into it. This is why Eric and Matt’s paper is important, and why anyone using the BERL study as a justification for restrictions on our liberties must be beaten about the head with it.