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The Ethics of Modelling Costs

By Eric Crampton

Methodological tricks can deliver headline-grabbing numbers for a good cause, but at the risk of subverting public policy and compromising professional integrity.

A Senior Lecturer in the Department of Economics at the University of Canterbury, Dr Eric Crampton blogs at

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There’s an old joke about economists. A mathematician, an accountant and an economist are bidding for a bit of consulting work. The sponsor wants to know what two plus two yields. The mathematician says it’s four. The accountant says it’s four, give-or-take 10%. The economist closes the door and whispers to the sponsor: “What do you want it to be?”

If your client wants to show that his or her industry provides massive benefits and consequently should be subsidised, there are ways to produce such figures – if you are happy to deviate from the standard method and to put a few somewhat sneaky assumptions into an appendix. My favourite example was a PricewaterhouseCoopers study claiming that adult and continuing education, including night courses in Indian cooking, saved New Zealand NZ$250 million in crime costs by halving each student’s likelihood of committing any crime. If you want to show that some social ill costs the country enormous amounts of money, there are ways of doing that too.

In 2008 a study commissioned by Australia’s Department of Health and Ageing estimated the “social costs” of alcohol abuse in Australia at some A$15 billion, well over $600 for every person in the country. As I had previously cast a critical economic eye on a New Zealand application of that study, an Australian alcohol consortium asked me to see what part of that A$15 billion...

The full text of this article can be purchased from Informit.