David Leonhardt has a nice piece in the New York Times on the opportunity cost of the trillion dollar Iraq war. Leonhardt does a good job of getting the concept across without actually using the economic jargon. Coincidentally, I have a piece in tomorrow’s (Thursday’s) Australian Financial Review, making the same point, not for the first time, along with a reference to the work Kahneman and Renshon on psychological biases to hawkishness.
{ 16 comments }
Rob Hyndman 01.17.07 at 9:22 am
The real opportunity cost: All of that $ could have been invested in truly securing Afghanistan and allowing that country to finally recover from the ravages of the last couple of decades of conflict there. A Marshall Plan for our time. A well-intentioned and responsible effort would have stood as a monument to the will of Western nations to help others – including Muslims – even those not fortunate enough to be located on top of oil fields.
Vance Maverick 01.17.07 at 9:58 am
It’s pretty good. At the end, though, Leonhardt mentions
the most popular alternative — a far-less-expensive political strategy that includes getting tough with the Iraqi government.
This is just a touch bizarre. I half suspect he first wrote “withdrawing the American military from Iraq”, but some higher-up substituted a bit of boilerplate from Bush’s TelePrompTer. The result doesn’t even make sense — “getting tough”, whatever it may mean, doesn’t entail any economic saving.
Neil 01.17.07 at 2:04 pm
A bit sweeping, the lack of a peace keeping force in Darfur is not the result of a lack of funds.
But there’s a serious problem with counter factuals here. Would that money actually go to all those wonderful missed opportunities? Clinton (and not intentionally, its not a criticism of Clinton) saved quite a bit of money not intervening in Rwanda and for 3 years in Bosnia. Did that money really go to the opportunities that would have been missed?
stostosto 01.17.07 at 3:38 pm
Well, by definition it went to something else that would have been missed. Since it did so, that something else must have been valued by those responsible for spending the money on that something else (whether consumers that saved some tax money or government that had more money for other programs or for paying down the public debt).
This is sort of the point. And it’s well worth making. In fact it should be shouted from the roof tops, over and over and over again.
aaron 01.17.07 at 4:15 pm
Trillion $ war? How’s the money spent and where does it end up?
I’ll give you a hint, it starts with a ‘U’.
aaron 01.17.07 at 4:17 pm
Alternately, how could those dollar have been spent? Where would they have gone? What would we get?
terence 01.17.07 at 6:33 pm
If anyone’s interested, I had a (quick) go at looking at the opportunity costs of the Iraq war in terms of international development (improved global sanitation, health care etc). The post is here
I’m inclined to believe that the helath/education etc. cost estimates must be underestimates. But even if they were the numbers are still pretty shocking.
Neil Morrison 01.17.07 at 6:35 pm
Some of that money would have been spent on containing Saddam anyway. I’m not sure how much that was and one would have to factor in how long that would have been maintained and then what the range of costs there might have been in the method of Saddam’s eventual demise.
"As You Know" Bob 01.18.07 at 12:20 am
A trillion bucks is a LOT of money. It’s worth noting that America’s attack on Iraq has cost enough to PAY every single Iraqi about $10,000 per capita PER YEAR.
Of course, Republicans believe that foreign aid is intrinsically wrong – but it’s worth considering how much good will we could have garnered by simply paying off the entire country.
bad Jim 01.18.07 at 3:40 am
The greatest cost of the war may yet prove to have been the two elections that produced Republican majorities in Congress and two conservative seats on the Supreme Court.
It would certainly have been cheaper to prescribe free medication for the fear-stricken electorate, but they didn’t want to be sedated.
Ambrose 01.18.07 at 7:05 am
If the dollar value of a life is set at $1.5 million, then the cost in terms of lost lives is $4.5 billion. I do not endorse the $1.5 million figure, but it is used in cost benefit analysis and is used by insurance companies in settling death cases. If someone has a better number, I would be interested in hearing it.
John Quiggin 01.18.07 at 8:38 am
Neil,
This piece from 2003 estimated the cost of containment at less than $20 billion per year.
KCinDC 01.18.07 at 9:40 am
Ambrose, you left out the word “American” before “life” and “lives”.
aaron 01.18.07 at 2:33 pm
1.5 million is probably a good estimate for an american (current per capita GDP time average working life would get you a better number). You could get more precise (figure expected income of a soldier, contracter, etc), but I don’t think precision is necessary for this type of analysis.
For an Iraqi, you could do the same using pre and post war numbers.
Still, there’s the problem that much of one dead person’s work will still be done, just by someone else (we are likely to overestimate the value of a life).
abb1 01.19.07 at 5:38 am
Current value of known Iraqi oil reserves is, I believe, somewhere in the neighborhood of $10 trillion.
Enough said.
derrida derider 01.20.07 at 3:03 am
You can’t help thinking that it would all have been much simpler to have just offered Saddam and his family a few billion to move to some South American country.
But of course that would not have satisfied the war party’s bloodlust.
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