Bad economics not harmless

LAST Saturday, Bundanoon made headlines as the first town in the world to stop the sale of bottled water. Nestled in the hills of NSW's southern highlands, Bundanoon, with its environs of spacious country homes, seems more likely to figure in magazines such as Town & Country, if they still exist, than to be splashed across the world's press.

But no sacrifice is too great to save our planet and the good people of Bundanoon, when next they feel the hark of the bubbles, will have to break out a bottle of Bolly rather than bellow for the Perrier.

The paradox, of course, is that Australian consumption of bottled water is far more likely to be too low than too high.

If the choice really is between the bottled stuff and the flow of the tap, then it is surely relevant that water charges in Australia are generally below efficient levels.

Were water charges to fully reflect costs, including the value of otherwise forgone environmental uses, demand for imported water should and would rise.

Far from being derided, those annoying young women one sees sipping water hauled from the fjords of Norway should therefore be hailed as public benefactors who selflessly ignore distorted relative prices to help save the Murray.

I recognise what irks the voters of Bundanoon is that bottled water comes in bottles. That it indeed does is difficult to argue with. But tinned tomatoes come in tins, silken tofu in plastic and designer muesli in cardboard boxes. If we are to ban packaging, let's be even-handed about it.

However, it would be more sensible to simply ensure prices for packaged goods reflected any otherwise unaccounted environmental costs they may cause, which, on the best estimates available, are likely to be extremely low.

Of course, merely getting prices right would hardly seize the world's attention. But it would have the great benefit of not preventing those who enjoy the taste of fizzy water, or who hanker for those strange combinations of water with what are loosely described as flavours, from indulging their preferences.

This is not to say that prohibitions have no place. After all, Moses brought down from the mount 10 commandments, not nine relative price signals. You shouldn't be free to murder me, no matter how much pleasure you would derive: the optimal number of murders, at least of me and a few others I can think of, is strictly zero. But why shouldn't you be free to drink water from the oases of the Sahara, if that is what you want and are willing to pay for, rather than that provided by the oh-so-prosaic water utility?

That said, Bundanoon's ban, however ill-conceived, only affects the people of Bundanoon, who, after all, have brought it on themselves. No such inhibitions afflict the national Preventative Health Taskforce, which would have us all live in flinty rectitude.

The goal, according to the taskforce's recent report, is for Australia to be "the healthiest country by 2020". Who we should be healthier than is not disclosed; presumably it is every other country. But why should we go for gold in this respect? Being healthy is doubtless a good thing, but is it the only goal in life?

Savonarola would have had no difficulty with this question. Abstaining, he would have said, is a moral duty, and a long line of wowsers has agreed. By the early 20th century, however, the wowsers' rhetoric had changed and nowhere more so than in Australia. In the words of one leading advocate of population health, drink, lack of exercise and a general turn away from clean living "endangered the survival of the white race in Australia". If we did not live healthily, we would be no match for teeming Asians.

The Preventative Health Taskforce's argument is different again: we should live more healthily because vice is reducing our incomes. Startlingly large estimates, adding up to about $50 billion a year, are presented as the costs of alcohol, smoking and obesity. Given these costs, these are plainly health threats that cannot be leftunchecked.

Perhaps it is true, though it comes as a surprise, that we live in Babylon at its most dissolute. Yet even for such sickening debauch, the taskforce's numbers look too bad to be true: and indeed they are.

The main problem is that costs are counted but benefits are ignored or discounted.

As for the way costs are counted, it verges on the bizarre: have a third drink and any benefit you got from the first two is assumed to disappear. Nor is a clear distinction made between costs that fall on those who choose to bear them (and which hence should be a matter for them), and costs that fall on unwilling others (and hence might be an appropriate area for government intervention).

Additionally, the taskforce says nothing about how much its proposed interventions would cost, and how that cost compares with the incremental benefits. It repeatedly states that intervention works; but that is not the question. Rather, it is whether intervening more would work and be worth it. Many, if not all, of the interventions it recommends are already in place: wouldn't scaling them up involve rapidly diminishing returns?

And may there not be unintended consequences? For example, moderate drinking has widely recognised health benefits. Couldn't measures aimed at deterring alcohol consumption reduce such moderate use, perhaps more than they affected the small number of really heavy drinkers?

It would have been better if the taskforce had grappled with these issues before dispatching us to a future in which an Orwellian national prevention agency sends tobacco control workers to implement strategic goals of smoking reduction.

None of this is to denigrate well-meaning efforts to improve our lot. But woolly thinking is no way to save the world. And reliance on bad economics, a preventable disease that has reached epidemic proportions, is or should be a crime. Until it becomes one, the world will not be safe for drinkers. Not even of bottled water.