An important cost benefit analysis

Catherine Harris at Stuff reports:

A former adviser to the Reserve Bank and World Bank says the cost of bringing in tougher tests for earthquake-prone buildings would far outweigh the benefits.

Economic consultant Ian Harrison said he had analysed proposals put forward by the Ministry of Business, Innovation and Employment on building standards, and it showed the cost of the tougher regime would be 50 times the benefits.

In Auckland the cost was 1762 times the benefit.

Harrison said his research was based on the ministry’s own expert analysis.

“The proposals will save only 0.25 lives a year at a cost of over $4 billion,” he said.

This speaks volumes.

Risk must always be balance against cost. Far from clear that the Government has it right in this case.

UPDATE: Have just had clarified that the Government has made no decisions on building standards, so ipso facto don’t have it wrong or right.

The proposals are from the Royal Commission on the Canterbury Earthquakes. MOBIE are consulting on those recommendations, but the Government itself has made no decision on any changes. They are just doing what a Government should – consulting on what the Royal Commission has recommended.

Incidentally submissions close this week on 8 March on them.

While I think a lot of deference should be given to the Royal Commissions, I don’t think that means what they recommend should automatically be accepted. I think the balance of cost and risk has to be carefully considered, and at this stage it doesn’t appear the Commission has got that balance quite right. We’ll see in time what the Government itself actually proposes.