The Cost of Cost Studies

Eric Crampton (), Matt Burgess and Brad Taylor

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: We review methods and assess the policy influence of a series of publiclyfunded Cost of Illness studies, mostly published since 1990. Our analysis shows that headline cost estimates, including the influential paper by Collins and Lapsley (2008), depend on an incorrect procedure for incorporating real world imperfections in consumer information and rationality, producing a substantial over-estimate of costs. Other errors further inflate these estimates, resulting in headline costs that are unrelated to either total economic welfare or GDP and therefore of no policy relevance. Counting only external, policy-relevant costs not only deflates overall figures substantially but also results in rank order changes among cost categories. Despite this, Cost of Illness studies appear effective in mobilizing public opinion towards increased regulation and taxation that is not justified by an expected increase in economic welfare: this is the cost of cost studies.

Keywords: costs and benefits of alcohol usage; alcohol policy; Australia; New Zealand; adequacy of consultancy reports (search for similar items in EconPapers)
JEL-codes: A11 H23 I18 J17 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2011-07-01
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:11/29

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