Project SMART


Go to content

MEETINGS AND CONFERENCE

Meetings and Conference



Minutes of the Mini-Seminar on Cost Benefit Analysis of Alcohol Policy.
(Barcelona, Emporda, 18-19 October 2010).

< PDF document >    


1. Introduction

Governance of alcohol policy can be understood as the way in which a society or organization steers itself with regard to managing alcohol and its consequent harm. The harm done by alcohol cannot be reduced to biological phenomena; psychological, social, historical and economic factors influence the harm done by alcohol to individuals and to those around them. In the research field, these and many other themes have been investigated; however, there is still a gap in the way they can be linked in more comprehensive approaches that have important implications for the governance of alcohol policy.

Alcohol policy does not occur in a vacuum. One example of this is the impact of economic recessions on health and on alcohol-related harm; another example is the influence of the value that consumers place on drinking. Costs and benefits as well as the value of health and human life must be considered integral to alcohol policy.

A number of questions can be raised about the role of cost-benefit analysis (CBA), which inform governments about where to invest in resources, to reduce harms, particularly, but not only, to others. CBA is not an easy topic and there are different views about measurements, modelling and about how to incorporate issues like the ones described above in the analysis; in this sense, CBA for alcohol policy is work in progress.

A group of experts on CBA and governance of alcohol policy, convened by the Department of Health of Catalonia, met in Barcelona and the surrounding Emporda, 18-19 October 2010, as part of the activities undertaken in the SMART project - "Standardizing Measurement of Alcohol-Related Troubles". Their aim was to discuss the importance of undertaking cost-benefit analyses and its value for alcohol policy. The meeting was an opportunity to review CBA's technical issues, such as measuring the value of pleasure and the value of pain, to consider lessons learnt from avoidable burden studies, to re-examine policy, when including harm to others in the analysis, and to account the implications of economy, inequities, and social welfare. The group of experts also reflected on issues such as the role of the alcohol industry, and how better to realign incentives at all levels and in all sectors that lead to health gain from reduced alcohol intake. The research field was also discussed, considering recommendations for future studies, for policy and for alternative approaches, and for thinking of additional policies that could help consumers make healthier choices.

2. What is cost benefit analysis and what are we trying to do?

Alcohol is not an ordinary commodity. Health itself, productivity, pleasure, social networks, conviviality, advertising, industrial production, drinking and driving, health systems, crime, and many other things influence the way societies deal with alcohol and the harm done by its use. There are private and external costs and benefits due to alcohol. What is the best and most comprehensive way to manage all of these factors?

Economic analysis through different methodologies have provided important knowledge about the social and economic costs of alcohol (social cost studies), health and economic impact of policy measures (cost- effectiveness analyses), and assessment of alcohol policies (cost-benefit methodologies). These methodologies have different analytical perspectives and CBA, for example, has a societal one, taking into consideration health and non health dimensions that can be explored using a matrix (Table 1) where cost and benefits are considered. Cost and benefits can be primarily internal or external as described in Table 2. Through pathways of analysis, CBA aims to measure consumption of market goods/services (unrelated to health), consumption of market and non-market goods and services (unrelated to health), and economic welfare, through increases or decreases in consumption of health-related services and goods, in production of non-health market and non-market goods and in savings, assets and capital formation as consequences of a certain alcohol policy (WHO, 2010).

Table 1. The matrix of cost and benefits


When undertaking CBA, each component should be considered in a comprehensive way. The implementation costs of brief interventions, for example, are not only related to the cost of training personal and providers' maintenance to deliver the interventions (WHO, 2009), there is also a complexity involving the implementation with effects over time. Further, in some of the CBA calculations and estimates the results do not refer to "real manageable money", while policy makers have real money to manage.

Although reductions in alcohol use are likely to reduce labour and productivity losses (Lye & Hirschberg,
2010), studies approaching these issues are scarce, and more data is needed on alcohol's impact on absenteeism and work performance (how a reduction in consumption would enable the person to return to work).

Table 2. Cost and benefits described by being primarily internal or external

Source: WHO, 2010
Note: The costs caused by harms to others are all external, including costs for crime, health care, social services, research, prevention, social security, unemployment and retirement benefits, labour lost by the victims of accidents and crime, and nonfinancial welfare costs (including fear of crime).

The most common unit for measuring healthy life years is the quality-adjusted life-year (QALY). Health- related QALY evaluations follow a standard tradition in health economics: state valuations for each alcohol- related condition, and a health state for other conditions. For example, if a year living with alcohol dependence is assessed as having a QALY value of 0.6, this means that 6 years of perfect health are worth
10 years of alcohol dependence (WHO, 2010). Ethical issues are present when one attributes a fixed value to life, assuming that this could be applied in different contexts, times and places. Research has suggested that QALY valuations vary according to many factors like individual's wealth, age and family status, as well as baseline levels for a given risk, changes in the risk, moral responsibility for it and whether it is public or private (WHO, 2010). These differences impact the decision of which monetary valuation of a QALY to use in the analyses. In real world relationships, when policy makers make the case for health they are asked for money valuations. So, if the aim is to move the debate to a different level, it is important to find a way where these issues can be addressed, preferably something that looks at changes over time.

Another component to be considered is the impact of changes in policies to the alcohol industry. If regulation policies are implemented, what would happen to the alcohol industry? When evaluating whether particular services are affected by particular policies, there are transitional costs to be considered. Major transitions could impact on alcohol industry jobs. However, there are opportunity costs associated with transition, and on balance there are potential gains, with other jobs created in the economy as a whole. Media/marketing practices also influence transitional costs. Marketing messages are more powerful than education and directly affect drinking initiation. Sponsorship is critically important here. What would happen if advertisements were banned? How much is the industry currently infringing people's liberties through marketing?

3. Counting in alcohol's harm to others

The harms caused by someone's drinking to others can be quite small, quite severe, or even life- threatening, depending on the type of burden focused. Harms can vary from a spoiled holiday celebration, physical abuse, a child left stranded when a drinking parent fails to pick them up, or people's fears of being injured or even killed.

The reduced wellbeing and health status for those with heavy drinkers in their lives is under researched. Casswell et al. (submitted for publication) created an index of exposure to heavy drinking. The greater that people were exposed to a heavy drinker in their lives, the lower they reported satisfaction and well-being in life. Heavy drinking was defined by the respondents and the relationships found were similar to those reported on studies about exposure to people with disabilities. Conventional cost of alcohol studies mostly measure the costs to the drinker and to governments. Adding in costs to others matters, as, at least in Australia, this doubled the cost estimates (Room et al., 2010).

4. The avoidable cost of alcohol

Australian and Canadian studies have provided important evidence about the avoidable costs of alcohol to society. For example, in Canada, Rehm et al. (2008) reported that by implementing effective policies some portion of alcohol-attributable burden and its costs could be avoided. Under conservative assumptions and using interventions which are generally supported by public opinion, one billion dollars per year could be saved (7% of the total social cost). The largest impact would come from comprehensive interventions affecting the overall level of drinking such as increased implementation of brief interventions and increased taxation.

5. Modelling the costs and benefits of increasing alcohol prices

What can impact alcohol policy? How do changes to prices affect consumption in the population? And how do changes to the consumption of alcohol affect outcomes?

The Sheffield Alcohol Policy Model (Purshouse et al., 2009) is the closest approach to a cost-benefit analysis and could supply data on implementation costs, health and welfare costs, costs to industry, labour and productivity losses, costs to pleasure and non-financial welfare losses. The overall concept of a model developed by the University of Sheffield is the distribution of prices, the distribution of patterns and the distributions of alcohol attributable outcomes. It is a pragmatic approach modelling the impact of feasible policy options.

Estimates found that a 10% price rise would reduce alcohol consumption by 4% and premature deaths by
13%, with a total value of harm reduction of ?5.9 billion over 10 years. When prices rose, consumers spent more on alcohol, even though they reduced their drinking. A 10% price rise was associated with an overall increased spend of €1.2 billion per annum, some 5.3% of the total consumer spend on alcohol.

6. What is the value of a human life?

What economists define as "value" may not reflect people's feelings and beliefs in the real world, or what they might consider gains or losses about their health. One concept introduced in economic analysis is the value of a statistical life (VSL) that can be thought of as a convenient way to summarize the value of small reductions in mortality risks (Suhrcke et al, 2005). It is not meant to be applied to the value of saving the life of an identified person (i.e., the value of changing the risk of mortality from one to zero). In order to study this concept researchers have investigated how much individuals are willing to pay for an extra year of life, observing wealth-risk trade off and using direct surveys. It is assumed that people tend to maximize
'utility' subject to budget constraints, and that life is a trade-off between fun ('consumption') and risk ('mortality risk'). So, the idea behind willingness to pay analyses is that people want to maximize happiness. Different values and different individuals lead to different models. There is not a stable value for life to be incorporated in the model. Different values for different risks in different countries should be discussed.

7. Mitigating the impact of economic recessions on the harm done by alcohol

Economic recessions lead to job losses that can impact on health. Stuckler et al. (2009) investigated how economic changes have affected mortality rates over the past three decades in countries members of the Organization for Economic Cooperation and Development (OECD), and found that a more than 3% increase in unemployment had a greater effect on suicides at ages younger than 65 years and deaths from alcohol use disorders, supporting the notion that short-term negative effects of unemployment mainly affect psychological distress. Moreover, younger populations were more sensitive to the negative health effects of rising unemployment than were those older than 60 years.

Stuckler et al. (2010) also found that active labour programmes that kept and reintegrated workers in jobs could mitigate some of the adverse health effects of economic downturns. Increased overall social welfare spending was significantly associated with reduced mortality from diseases related to social circumstances (such as alcohol related deaths), even though health care spending was not. More research is needed to understand the effect of different types of social spending and the implications of economic policies for health.

8. Discussion - implications for the governance of alcohol policy

What would a policy maker expect from researchers in terms of translating evidence and technologies that could help to improve policy decisions and change behaviours? Is it more important to a policy maker to have satisfied citizens or to save some Euros? Or, a mix of both? One could say that a good start in terms of research could be by providing a comprehensive tool to help identify the costs and benefits of specific interventions and the political consequences of the policy implementation, taking into account issues like the value that consumers place on drinking and the spending costs needed to manage the alcohol-related harms that will appear.

CBAs have demonstrated to be an informative tool to offer to policy makers. However, important constraints of this type of analysis can be identified. An example is when economists talk about the value of a statistical life. How far are we from real life relationships? People attribute different meanings to the way they drink according to the cultural background they have. In the same way, people can react differently to an increase in alcohol prices, changing their patterns of drinking accordingly. Pleasure and happiness are concepts with different meanings that are also culturally influenced.

To the extent that pleasure can be translated into a utility/expenditure, one could consider that it is already included in CBA. However, the pleasure people get from drinking goes beyond what they pay for it. Increased prices decrease consumers surplus, a cost that considers pleasure as a stable item (the same bottle of wine will always provide the same pleasure). But from a psychological point of view this is not true; people can have different pleasures from different beverage types. Pleasure in CBA is measured as a cost, but in real life it is not tangible. Alcohol is not a common good and from the individual side, pleasure could be considered as not a business of the state, but rather a private affair. The role of the state could be considered as preventing harm. Further, alcohol is a drug and an intoxicant. The relationship between alcohol and pleasure is complex as people may enjoy its use, for example in the evening, but regret it the following morning. People's pleasure could be enhanced by getting them to drink less; however, more research is needed on this issue. How do we shift the cultural perception of pleasure?

Alcohol policies are consequences of historical, economic, social, and cultural factors. There are costs and benefits from governments' perspectives and from the society perspective. Science has the role to inform the public debate, translating research evidence into technical decisions. Analysis should not be reductionist. For example, morbidity is very important, but is just one point of the equation. Longitudinal approaches are also necessary, seeing the phenomena from different perspectives.

The starting point of the public debate about alcohol policy is still, much of the time framed as a negative, individualized and restrictive. However, alcohol is not only an issue of individual level; it also has to do with societal perceptions and interactions. Individualizing approaches can have the negative consequence of labelling people. Apart from dubious effectiveness, these types of policy contribute to social inequity, as the stigmatized ones will be the poorer drinkers (Room, 2005). Aggregate-level interventions have the great advantage of not singling people out, as well as being effective. When moving the focus to the harm caused to others, there is a potential risk of stigmatizing people who drink, although this could be considered a desirable outcome, as with drink driving. To cost elements of stigma is a challenge for economists.

One could argue that different perspectives using more positive and comprehensive narratives that demystify moral perspectives and that account for the benefits of drinking as well as the costs, could attract a better social support to change policy into more cost-effective approaches that support healthier behaviours. One of the benefits of this approach would be to provide an environment in which people are freer to make healthier choices.

10. References

Casswell S, You RQ, Huckle T. Alcohol's harm to others: reduced wellbeing and health status for those with heavy drinkers in their lives. Submitted for publication

Lye J and Hirschberg J. Alcohol consumption and human capital: a retrospective study of the literature. Journal of Economic Surveys 2010; 24: 2, 309-338. doi: 10.1111/j.1467-6419.2009.00616.x

Purshouse R, Brennan A, Latimer N, Meng Y, Rafia R, Jackson R, Meier P. Modelling to assess the effectiveness and cost-effectiveness of public health related strategies and interventions to reduce alcohol attributable harm in England using the Sheffield Alcohol Policy Model version 2.0. Report to the NICE Public Health Programme Dvelopment Group, 2009

Rehm J, Gnam WH, Popova S, Patra J, Sarnocinska-Hart A. Avoidable cost of alcohol abuse in Canada 2002. Report, 2008

Room R, Ferris J, Laslett AM, Livingston M, Mugavin J, Wilkinson C. The drinker's effect on the social environment: a conceptual framework for studying alcohol's harm to others. International Journal of Environmental Research and Public Health 2010; 7: 1855-1871. doi: 10.3390/ijerph7041855

Room R. Stigma, social inequality and alcohol and drug use. Drug and Alcohol Review 2005; 24: 143-155

Suhrcke M, McKee M, Arce RS, Tsolova S, Mortensen, J. The contribution of health to the economy in the
European Union. Luxembourg: Office for Official Publications of the European Communities, 2005

Stuckler D, Basu S, Suhrcke M, Coutts A, McKee M. The public health effect of economic crises and alternative policy responses in Europe: an empirical analysis. Lancet 2009; 374: 315-23. doi: 10.1016/S0140-6736(09)61124-7

Stuckler D, Basu S, McKee M. Budget crises, health, and social welfare programmes. BMJ 2010; 341: 77-79

World Health Organization (WHO). Evidence for the effectiveness and cost-effectiveness of interventions to reduce alcohol-related harm. WHO Regional Office for Europe, Denmark 2009

World Health Organization (WHO). Best practice in estimating the costs of alcohol - Recommendations for future studies. WHO Regional Office for Europe, Denmark 2010

11. Acknowledgements

We thank the European Commission and Generalitat de Catalunya (GENCAT) for co-financing the SMART
project (Standardizing Measurement of Alcohol-Related Troubles). We thank GENCAT for hosting the "Expert workshop on cost-benefit analyses and governance of alcohol policy". Michaela Bitarello do Amaral Sabadini prepared the notes of the meeting and Peter Anderson edited them.

12. List of Participants

Professor Peter Anderson, Catalonia, Spain, Public Health Consultant
Ben Baumberg, United Kingdom, LSE
Dr. Michaella Bitarello do Amaral Sabadini, Catalonia, Spain, Barcelona University
Dr. Peter Burge, United Kingdom, RAND Europe
Professor Sally Casswell, New Zealand, Massey University
Dr. Dan Chisholm, WHO
Dr. Joan Colom, Catalonia, Spain, Generalitat Catalunya
Dr. Brian Easton, New Zealand Independent Scholar
Dr. Antoni Gual Catalonia, Spain, Fundació Clinic
Dr. Priscilla Hunt, United Kingdom, RAND Europe
Dr. Eva Jané Llopis, Catalonia, Spain, World Economic Forum
Dr. Johan Jarl, Sweden, Lund University
Silvia Matrai Catalonia, Spain, Fundació Clinic
Professor Petra Meier, United Kingdom, SCHARR, University of Sheffield
Esa Osterberg, Finland, THL
Dr. Svetlana Popova, Canada, CAMH / University of Toronto
Dr. Robin Purhouse, United Kingdom, University of Sheffield
Professor Robin Room, Australia, Turning Point
Dr. Kevin Shield, Canada, CAMH / Univerity of Toronto
Dr. David Stuckler, United Kingdom, Oxford Universtiy
Professor Marc Suhrcke, United Kingdom, University of East Anglia


Back to content | Back to main menu