Unquestionable costs

Back in 2009, BERL told us that harmful alcohol use cost New Zealand's health system $286 million dollars for the 2005/06 year. There were a few problems with their method. It's worth revisiting these now that a new BERL number on alcohol health costs is out. I'd critique their current numbers except, well, I'll come back to that one.

The BERL report was modelled on an Australian study by Collins and Lapsley. Collins and Lapsley used a table of alcohol aetiological fractions to assign health costs. So if alcohol is responsible for 100% of alcoholic liver cirrhosis, 100% of the costs of alcoholic liver cirrhosis are attributed to alcohol. For some disorders, alcohol consumption reduces costs to the health system. In particular, cardiovascular disease is reduced by alcohol consumption. So while someone consuming 8 standard drinks per day is likely to blow his liver out (and impose costs on the "treating bad livers" part of the health system), he'll likely have pretty clean arteries (and reduce costs on the "fixing plugged arteries" part of the health system). To get a measure of net costs you take all the fractions, some positive and some negative, and multiply by the costs of each to the health system. This will remain an imperfect measure of aggregate health costs: if moderate drinkers live longer, they'll impose greater total costs on the health system by living longer than teetotalers; if heavy drinkers die early, they'll cost the health system money early on but save the system money in the longer term. But the method gives you a first cut.

So, what did BERL do? They took Collins and Lapsley's table and surgically removed any disorders for which alcohol provided protective effects. Why? Footnote 15:

A related, but separate, issue is that of the beneficial consequences of drug consumption.  This report concentrates specifically on the social costs of harmful use.  It does not analyse the impacts from non-harmful use, such as any protective health effects of alcohol consumption.  That is, beneficial impacts of alcohol use are not included as cost offsets.

They do a bunch of handwaving about how health benefits are contentious. But their source document, Collins and Lapsley, included those benefits. And it's not a great out to say that there are no medical benefits once you get past 4 standard drinks per day. Sure, that's about where aggregate mortality risk goes past the baseline for teetotallers. But that curve is drawn for net effects: assuming away the benefits side puts a pretty big thumb on the scale in measuring total costs to the health system, especially when metastudies like Corrao's find strong cardioprotective effects well into the range where total mortality effects are pretty negative.

So after assuming away any possible health benefits from alcohol use, BERL found that alcohol imposed a large burden on the New Zealand health system. We didn't have the resources to reverse-engineer their pretty shonky zeroing-out of potential health benefits when we critiqued their study but simply noted it as something that made their figures rather higher than they should have been.

Anyway, BERL has a new figure out on costs of alcohol to Canterbury's health system. Or so reports the Christchurch Press. Their reporter, Georgina Stylianou, seems to be running off the press release here. She interviews a bunch of the usual suspects about just how awful alcohol is. Any fact checking on the figure? No. Why? The paper isn't yet released.

The report will be released in full this week and will show the range of conditions in which alcohol is a contributing factor.

Since I can't critique their new figures, I'll remind folks about what was wrong with their figures last go-round. I wonder if they've fixed anything.

It's not encouraging that the Christchurch Press seems to be playing into the media strategy that BERL and CDHB here are running: get a story on the press release, maybe another one when the report is made available; get the figures into public debate but don't let anybody have a chance at critiquing them. I'd hoped for better.

If this isn't a wowser, I don't know what is

The Press has a puff piece letting Doug Sellman explain how he's not a wowser.

In short, 'wowser' suggested Christian women and other busybodies who wanted to get between a man and his drink. And not just drinking but many forms of pleasure. When Australian artist Norman Lindsay was attacked over his nude paintings in the 1930s, he said, "I am sick and tired of this wowseristic country". To this day, Lindsay's authorised online biography has "irate wowsers" in North America burning his paintings.

Closer to home and in our time, Doug Sellman has had "wowser" thrown at him a few times over the years. Along with other, less polite words. All because he has talked back to the alcohol industry.

Ok. This from the guy who got mad about the Woodstock mixed bourbon and cola drinks not just because of the booze, but also because they encouraged teenagers to have sex with their friends' mothers. Here's Sellman in an oped from the Herald not too long ago:

Mr Kerr is saying these young people and women need to be more responsible in the face of aggressive targeted marketing. But the industry he is defending is cynically trying to convert these people into heavy drinkers. Is that socially responsible?

Alcohol advertising on TV has recently reached a point that one wonders whether it can sink any lower. The latest Woodstock advert[*] aiming to get boys to drink bourbon sweetened by Coca-Cola in a product called Woodstock, associates a can of Woodstock, a "woody", with a penile erection and not unsubtly is encouraging them to have sex with their best mates' mothers.

The ad also seems to be encouraging middle-aged women to get their teenage clothes back on and flirt with their son's best mates. I presume some would defend these adverts as responsible business practice and contributing to a healthy society.

So Sellman isn't leading an old time Christian Temperance Union crusade against fun.  As the billboard says, Yeah Right.

Here's Sellman warning that alcohol is a Group 1 carcinogen, comparing it to plutonium, and ignoring that birth control pills are in the same darned category.

Here's Sellman pushing for taxes on soda.

Here's Sellman saying that muesli is addictive.

Further in the Press article, Sellman says it's all about the science:

As wowser and related insults show, alcohol reform is an emotive field where much is at stake - revenue streams included. Sellman wants to emphasise the science.

"It perhaps needs to be stated my colleagues and I are not basing our suggestions for alcohol law reform on our own opinions or life experience," he concludes. "They are based on the best international scientific evidence available at the current time."

The Press piece had earlier quoted the press release from Doug Sellman and Alcohol Action NZ colleague and U Otago Prof Jennie Connor that grievously exaggerated the findings from Chris Auld's paper on the effects of minimum pricing in Canada. Maybe that press release was "based" on the best international scientific evidence in the same way that a lot of stuff on TV is "based on a true story". Because it sure misrepresents what Auld actually found. Why should we trust anything he or Connor say about alcohol?

* I'd posted the ad here when Sellman first posted this op-ed about the moral decay of today's youths and their mothers.

Watching the slide down the slippery slope

For now, it's just a proposal from the New Zealand healthists.

Health officials worried about an obesity epidemic want fast-food advertising dropped from public property, including bus shelters, and are questioning fast-food and soft-drink sponsorship of public events.

They have also raised concerns over the lack of political power to stop fast-food restaurants being built near schools and in poor areas.

What about McDonald's sponsorship of things like Ronald McDonald House? Says Auckland Health Board Clinical Director Robyn Toomath:

"We've reached that purist approach with tobacco, completely hardline. There's no way in the world we would have a Rothman's Centre for Kids in Hospital. You start off saying we won't promote the sale of goods, then the next step is [not allowing] sponsorship of these companies."

McDonald's, Rothman's, no logical difference. No slippery slopes, 'till you're close to the bottom.

For a more reasonable take on McDonald's and the miracles wrought by careful supply chain management, consult Blunt Object [language warning].

Christchurch Costs

The NBR's NZ Property Investor magazine has what may be a leak on estimated costs of some of the big ticket items in the proposed Christchurch plan. It's not online; I thank Hugh Pavletich for the tip. [Update: Hugh's been keeping track of all this kind of stuff at Cantabrians Unite].

But NBR NZPI has been supplied with figures by a reliable source who cannot be identified due to possible repercussions. The covered rugby stadium is tipped to cost  $506 million, the convention centre $460 million and the metro sports arena $227 million. Other elements of the plan make up the balance of the $1.6 billion.

By contrast the recent parallel city plan based on the "Share An Idea" programme with residents allocated about $200 million for a rugby centre, $150 million for a convention centre and $120 million for a metro arena.

According to NBR NZPI informant, the government has indicated it would come up with roughly half the money for the Rolls Royce plan. But subsequently there have been calls for the city sell assets to pay a greater share.

A community leader Reverend Mike Coleman described the scale of the plan as "bizarre."

"It's emporer's clothes stuff. To even talk seriously about a rugby stadium or convention centre at these prices is absurd. We are not a big city in the scheme of things, we are a large town of about 300,000 people. We don't want to end up stuck with millstones like the Dunedin stadium."

Pick up a copy at your local newsagent.

A city of a few more than 300,000 people is planning on building a stadium with capacity to seat about 10% of the city's population.

The Christchurch Star called last week asking for comment on how the cost for these sorts of things might be borne, and whether amalgamating the local councils might be a way of spreading the costs [yikes!]. I'd sent them this, but only got their voicemail requesting a shorter version after they'd hit the press deadline. So I'll put it here instead.

“It makes sense that Christchurch ratepayers, one way or another, contribute to the cost of enhancing facilities over what we had before the earthquake. Those costs should be met by a mix of longer term rates increases, debt issuance, and sales of existing assets that would have more value in the private sector than in the public sector. Trying to meet it all through current rate increases would unnecessarily penalize households, many of which are under reasonable fiscal distress where insurance is not enough to cover damages suffered. There are about 133,000 households in Christchurch; if Council is to be on the hook for $787 million [number the Star cited to me], the per-household cost is then just under $6,000; average rate increases on individual households would be less than that as rates paid by businesses would also increase substantially, but we should note that many of those businesses are also owned by local households.” 

“What is less clear is whether Council should really be spending large amounts of money on things like the planned Convention Centre or Stadium. The economic literature does not provide any strong support for that either kind of investment really provides any great benefit to a city, though you could make the case that that literature doesn’t typically look at cases where cities are trying to rebuild from earthquakes. I would hope that Council and the government might scale back their ambitions on both fronts. The plans for the Stadium depend on forced acquisition of property from people like the owners of Ng Gallery, who have been working very hard in their own way towards the Christchurch rebuild. When I take off my economist hat, I worry about the foundations of a city whose rebuild is based on something that’s awfully close to theft. And, when not hosting conventions, Convention Centres tend to be dead spaces. Wouldn’t it make more sense for Council to fund some overhead walkways connecting hotels that would want to be able to collaboratively host larger conferences than for Council to spend rather a large sum of money on a dedicated facility likely to be too large to meet typical future needs?” 

“I would also be very nervous about planned amalgamations of the local councils. Differences in regulations across the Councils seemed to help a lot in getting new residential construction going  after the earthquakes. Where Christchurch Council was too busy with other things to move particularly quickly to release more land for housing, Rolleston and Kaipoi were able to start expanding. Smothering that kind of ability for different areas to respond differently in the face of disasters removes some of our institutional robustness. Further, it only makes sense to spread any burden to Waimakariri and Selwyn to the extent that residents of both of those districts disproportionately make use of Christchurch-funded facilities; otherwise, any burden-spreading should come from the national government’s contribution to the rebuild. I would expect that simply having a higher fee-for-service in some of the new facilities for those not normally resident in Christchurch would make more sense than amalgamating the Councils.”

Australia's fun police

New South Wales (Australia) Police Chief Andrew Scipione wants restrictions on violent video games because he thinks they cause crime.

There exists a literature on whether violent games affect crime rates. The best evidence I've seen says that while violent games get violent people excited about violence, they also reduce crime. How? By keeping violent people in their houses playing violent video games where they'd otherwise be going out to do violent things. They call it "voluntary incapacitation"; prison is "involuntary incapacitation". Or see this one.

At least the technology section of News.com.au is a bit less credulous of Scipione's claims.

It's worth remembering that Scipione also reckoned that the Collins and Lapsley measure of the social costs of alcohol use, a $15 billion figure largely based on costs heavy drinkers impose upon themselves via lower life expectancy, lower wages, and spending on alcohol, was actually a measure of the costs of alcohol-caused crime. I don't know whether he still thinks that the Collins and Lapsley number represents crime costs, but he's still pushing for some fairly serious restrictions on alcohol availability.

The Chief of the Fun Police?

I hate economic impact numbers

What the heck is "economic impact" even supposed to mean? Seamus keeps wondering if it wouldn't be fun to set an honours project asking "To what relevant economic question is "economic impact" a useful answer, if any?"

My main reason for hating them is that they're so awfully abused by the press. It's hardly the press's fault though - if we as a profession keep producing these figures without adequately explaining (or understanding, in some cases) what they are, they'll keep abusing them.

Today's example, highlighted by Matt at TVHE: a $200m estimated "economic impact" of health disparities between Maori and Pakeha New Zealanders gets turned by the journalist into a cost to taxpayers.

The University press release:

Avoidable deaths of Māori children in New Zealand are costing the country at least 67 lives and around $200 million per year in economic impact, but greater Government spending on primary care and other key interventions could help to resolve the problem, health researchers say.

The journalist version:

The public health physician said 67 Maori children died avoidable deaths every year, costing taxpayers $200 million annually.

Ummm, no. Unfortunately, the Auckland University press release is about as unhelpful as possible in letting any journalist sort this out. Why? Not only do they fail to link the article, they also fail to name the journal: the study was "published in an international public health journal".

If you search through PubMed on the two authors' last names, you can find the article. It's here. But little chance a journalist will have time to do that.

What do you get if you read the article? Here's the results brief at the start:

Preliminary estimates suggest child health inequities between Māori and non-Māori in New Zealand are cost-saving to the health sector. However the societal costs are significant. A conservative “base case” scenario estimate is over $NZ62 million per year, while alternative costing methods yield larger costs of nearly $NZ200 million per annum. The total cost estimate is highly sensitive to the costing method used and Value of Statistical Life applied, as the cost of potentially avoidable deaths of Māori children is the major contributor to this estimate.

So both the press release and the journalist's piece ignore that Vaithianathan and Reid produced a range of estimates with a $200m upper bound rather than a point estimate around $200m. And, the larger number relies on VSL measures. What's a VSL measure? The intangible costs of a premature death. That's only a cost to the taxpayer in the rather indirect sense that the people who are sad when someone dies prematurely may also be taxpayers, and that some of the VSL measure could be viewed (given how NZ's VSL measure is constructed) as partially being due to that premature deaths are tragic for the family. And, worse, the University press release cites the deaths as though they were something not included in the $200m.

There's other weird stuff in there. There's a measure of time out of work for grieving parents that's based around the median wage rate, but if the whole darned story is about the costs of poverty among Maori in terms of premature mortality, it's just a bit odd to use the median wage rate. But I'd hardly expect a journalist to pick that up.

Why oh why can't university press offices pumping published work done at their schools link to the darned paper and write things that won't be misinterpreted by journalists? Are they trying to confuse people? I could understand it if the article were behind a ton of subscription gates, but this one's free access.

Can we just ban economic impact studies? It's almost inevitable that the things get misinterpreted like this. And they then do far more to confuse than to illuminate.

Costs to the taxpayer of $200 million.... How long 'till somebody cites this in Parliament as a cost to the tax system? Any bets?

Inducing failure

Is cybersecurity a market failure? Every individual counts the cost to him of a virus attack but ignores the cost to others if his system becomes a zombie spam machine; consequently, people underinvest in computer security.

Eli Dourado does a great job in taking on this kind of argument in his Mercatus working paper - on the syllabus in my Economics of Current Policy Issues course. 

First, the externality is, in most cases, inframarginal: most individuals have sufficient personal interest in ensuring security that the external benefit accrues inframarginally rather than at the margin. In other words, while it's true that people benefit others when they install proper security software, they're doing enough to benefit themselves at the same time that they're likely getting things right.

Second, there are plenty of other parties that have an encompassing interest in ensuring that the Internet works well. Google has a harder time selling ads if a lot of clicked links install malware and the like; consequently, Google works hard to make sure that, if you're using their Chrome browser, you get lots of warnings if you try to visit a dodgy site.

We'd think that Microsoft would have a similarly encompassing interest. Why isn't a decent security system built into Windows? I recently built a computer and put Windows 7 on it. After a bit of searching around, I found that Microsoft produces a very decent, and free, Internet security package. So I downloaded it, for free, and installed it. And I wondered why it wasn't built into the OS. Surely it would be in Microsoft's interest that people using their machines be protected against virus attacks, and it's precisely the kinds of people who don't know they need to go searching for an antivirus package who'd be the kinds of people who'd impose costs on others by letting their machines turn into a zombie.

Then I remembered... Microsoft gets slapped around by the Department of Justice and the European antitrust guys whenever they try to make Windows better by adding features. Bundling antivirus into Windows, where it should be, could be deemed a measure that the Europeans would figure would hurt competitors; hurting competitors seems to matter more than helping consumers in European law. And Eli pointed me to this article from 2008 offering antitrust as reason why antivirus hadn't been built into Windows.

Fortunately, it looks like Microsoft's found a workaround for Windows 8. Antivirus will be built in, but will be automatically switched off if any other vendor's product is installed; it only turns back on if the user fails to renew the subscription to the alternative product. Note that Windows 8 is already under antitrust investigation in Europe, but for browser default issues rather than antivirus (so far).