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Farce of the Marb

Posted by Dr No on 26 April 2014

affordability.jpgIn the ’70s and early ’80s, in his outstanding TV criticism in the Observer, Clive James had an unfailing ear for the peculiarities of American pronunciation. Facing David Frost’s sing-song questions, Henry Kissinger fell bag on swapping his DTs and CGs. Meeting Frost’s aria-ettes on Vietnam with the sound of gravel being forced through a hand mincer, Big K conceded that ‘manipulading the domesdig affairs of another gountry is always gombligaded’. On Chile, where the Americans had been up to their usual tricks, Kissinger explained it was down to a certain ‘peculiaridy of the consdidution’. On another occasion a year later, asked what he and Reagan had discussed pre-election, Kissinger revealed the devastating charm of his verbal dricks. ‘I jusd wished him good lug’. No wonder Hopalong won.

No such lug affects today’s American political colossi, who are still as busy as ever manipulading the domesdig affairs of other gountries, but widout the benefid of Kissinger’s delivery. Instead, they make do with O-A(R) substitution. Commenting yesterday on the Ukrainian position, today’s Big K, John Kerry, warned of the ‘farce of the marb’. Where Kissinger once dropped verbal bombs, Kerry now skims speech stones. On the world stage, Shakespearian dragedy has all but given way to a carmedy of errars, yet one still fears it will end in tears.

Back harm in arl’Blighdy, the big news of the last week was the fall in crime, particularly violent crime. A number of surveys and studies all showed that the farce of the marb was in decline. When not so long ago we were a nation of binge drinking bottle fighting lager louts, we are now altogether more restrained. The usual suspects were called forth to explain the fall. Chief among these was something to do with alcohol. Here it got a bit more gombligaded. Temperance tots popped up everywhere offering differing accounts. Price, affordability, consumption and even unit-less social mores were all entered into equations, with predictably unpredictable results.

Much of this confusion stems from bad science. There is a tendency in alcohol research to know the answer, and then do the research to back it up; to put the bottle before the glass, so to speak. Those of the temperant tendency tend to mark up alcohol harm, those of the claret tendency tend to mark it down. And where there is association, there is a tendency to see causation. It is but a short step to Thatcher Assisinine Conversions. Where there is despair, let us sew hope, where there is darkness, light; where there is booze, temperance.

And where there is fire, smoke. This is fertile ground for numerology. For example, alcohol price may go up by more than overall inflation (perhaps because alcohol taxes have increased), yet may still be more affordable (because disposable income has increased, perhaps because other taxes have gone done). Or whatever. Dr No’s head starts to spin, and it isn’t because he’s just sharpened a sharpener. Other greater minds have spun far faster.

Take, then, the said price and affordability. Until recently, the received view was that while relative price had gently increased more than inflation, affordability had taken off on a champagne cork trajectory (upper dotted line in chart above). Even today, the Institute of Alcohol Studies’ Alcohol Affordability Factsheet opens with “Alcohol has become more affordable in the UK in recent decades”. This is not, ahem, entirely true. Further down, the factsheet does cover (and correct) certain ‘flaws’, but these corrections are mostly below the fold, and the opening statement still stands. For those who want to check the figures and do their own charts, the data (csv format) are available here.

The problem is teasing out price and income – and correcting a ghastly mistake. Price (first table on the IAS factsheet) is relatively straightforward: it has increased over the last few decades, overall by more than general inflation. If we adjust for general inflation, by dividing the Alcohol Price Index (API) by the RPI, we get a figure that represents the ‘real’ (ie inflation adjusted) increase in the price of alcohol. On the figures, alcohol inflation has outstripped general inflation by 20-something per cent, making alcohol – on price alone - less affordable.

But what about disposable income? What if real (inflation adjusted) disposable income increased by more than the real (inflation adjusted) increase in alcohol price? The idea here is that if alcohol costs more (after adjusting for inflation) but at the same time you have even more money in your pocket (after adjusting for inflation), then, so the logic goes, alcohol is more affordable.

This is where the temperance tots, in their zeal to show alcohol affordability had increased (so we need higher prices, minimum pricing, whatever), got carried away. We already have an inflation adjusted index for the price of alcohol (relative (ie real, inflation adjusted) alcohol price index (rAPI) = (API/RPI) x 100). To estimate an affordability index, we need to divide a real (ie inflation adjusted) household disposable income index (rHDI) by the rAPI, such that the alcohol affordability index = (rHDI/rAPI) x 100. If income (the numerator) goes up, then so too does affordability.

But oh-what-a-difference a letter and an apostrophe make! Alert readers may have noticed that household as above is at best ambiguous. The actual spelling and punctuation in the official definitions turn out to be ‘real households’ disposable income’. Crucially, the figure represents not individual but whole population income. Even if individual disposable income remains fixed, if the population grows, so too will ‘real households’ disposable income’. And what has the UK population done? Why, it has grown…

Pre-2010, the temperance tots’ champagne trajectory for affordability was fuelled at least in part by population growth. Once the ‘mistake’ - inverted commas because one can only wonder how the mistake was made in the first place – was spotted and corrected (by using per capita in place of population disposable income), the champagne pop becomes more of a plop. For the last decade, affordability (lower dotted line in chart above) has not risen, but fallen. Such, as Americans might say, is the farce of the math.

1 comment:

I would love it if you could pick this: to pieces for me Dr No. Focusing on “Crime falls…” summaries there is something wrong with the math...

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