What does Iraq cost?

by on November 17, 2007 at 8:24 am in Economics | Permalink

Here is my piece for the Sunday Washington Post on the costs of the Iraq war.  It is simply argued, but originality is not always a virtue.  So far I’ve received more email about it than any other article I wrote this year and the paper edition isn’t even out yet.

spencer November 17, 2007 at 8:39 am

From day one it has been obvious that this administration’s revealed preference was that it’s tax cuts were more important than providing the military the resources they needed to wing the war. The problem is not that they have spent too much on the war. Rather, it is that their talk and objectives have never been consistent with the resources they allocated to the war. If this is really a battle of civilizations comparable to WW II or the Cold War why are we only spending about 1% of GDP to win this war compared to 10% to 15% to win the Cold War and 33% to 50% of GDP to win WW II.

save_the_rustbelt November 17, 2007 at 10:07 am

I’ve been trying to estimate the NPV of downstream healthcare costs, both near term for the military and long term for the VA.

Given we will have VA costs for at least 70 years, and the extent of physical and mental injuries, even a rough number is astounding.

Alex Nowrasteh November 17, 2007 at 10:33 am

Tom, you’ve seriously confused the issue that Cowen has raised. The war is many many times more expensive than even the most pessimistic projections. The opportunity cost incurred by the war has caused enormous damage and increased substantially costs today and will decrease the likelihood that America will go after a regime in the future that ACTUALLY deserves it. The costs in this situation are enormous. Removing Saddam was a good thing, but I don’t see any other benefits. What are the benefits of this war?

chris November 17, 2007 at 10:53 am

@Tom

Sure, a stand had to be made somewhere: Afghanistan. The whole western world agreed on that, and most of the rest of the world didn’t exactly object.

mthomas November 17, 2007 at 11:01 am

Nice article. Thank you for taking a position on this.

People are very hesitant to think of war in terms of benefit and cost. Ideology seems to be the key distraction. I made a simple example the other day, that people have expected costs (X) blood and (Y) treasure. The benefit has to be some defined (Z) in this case it seems to be a stable democracy in Iraq. For finite (Z) some people saw X+Y > Z before the war started. As X+Y increased more people updated and started to flip to this position. We don’t have to tell a story about the media misleading the public on the progress in Iraq, we just have to take a set a vague priors and show that people update. If it had only taken 3,000 troops to free the country, and this was certain, many people would have signed on for this. Students of history knew with greater certainty (based on examples) that this task would not be easy and that it would not be clear or obvious when we ever had achieved the goal of setting up a stable democracy. It would seem very odd to our sensibilities to claim that anything spent so far in the Iraq war was a sunk cost. This component does not allow us to cost-benefit analyse, for good or bad we have a great deal of ideology wrapped up in our calculations.

In the Civil War, if Abraham Lincoln had known the costs of his war of 5 Aprils, do you think he might have offered to buy all the slaves in the south to emancipate them?

Mike Huben November 17, 2007 at 11:24 am

A lovely article, and very hard to disagree with any of it.

And I really appreciate the honesty of this admission:
“Mr. President, when the war started, I was convinced by your arguments that we had to stop Iraq’s dictatorship from getting the bomb.”

But I have to ask: where was your “Inner Economist” back then? You’re drawing fine conclusions with your 20/20 hindsight: but what about your foresight and bullshit detectors?

You also write: “So, Mr. President, I wonder: Lawrence Lindsey is gone, but exactly who else will end up getting fired?”

So, I wonder what penalties you will face for your oh-so-clever initial support of the Iraq war?

Raul November 17, 2007 at 12:03 pm

Tyler says:

“We still haven’t secured our ports against nuclear terrorism. The $1 trillion we’ve probably spent on the war could have funded the annual budget of the Department of Homeland Security 28 times over.”

Hey! I think spending it $1 trillion on DHS in any way a HUGE wasted investment. Tyler, u r just reallocating from one useless project to another! Why not pump those into something economically more meaningful? Infrastructure? Aren’t in some sense all defense spendings down the drain?!

odograph November 17, 2007 at 12:18 pm

I have a lot of respect for this essay, and for you in writing it. That said, I am afraid it feels like bolting the barn door, very securely, after the horse is gone. It is a tragedy.

sera November 17, 2007 at 12:33 pm

You have seriously confused issues.

Tom Kelly November 17, 2007 at 1:22 pm

Spencer:

Also, every war is fought incompetently. Grow up and get used to it. Watch “The War” on PBS and see all the lives that were lost conquering various Pacific islands that turned out to have no strategic value at all.

The attack on 9/11 was incompetent. If those terrorists would have been more competent they would have hit the buildings two hours later when they would have been nearly full. They would not have lost control of the 4th plane over Pennsylvania. Do you think radical Islamists are wringing their hands on radical Islamist blogs right now over the imcompetence of those terrorists?

yoyo November 17, 2007 at 1:47 pm

Of course every war fought is done so incompetently, although usually not as bad as this one. thats a good reason not to fight them, as a presumption.

David Sucher November 17, 2007 at 3:34 pm

Mr. Schweitzer.
You speak casually of the “beginning of an era of protracted conflicts” and the “pacification of Pakistan.”

Are you serious? There is neither the political will nor the military force to get into another fruitless adventure. The USA may well be under attack. But the current administration didn’t 5 years ago and still doesn’t now have the vaguest idea of how to repel the attack. The worst thing to be said of the Administration is that it has weakened the USA and made us less safe.

Rohit November 17, 2007 at 3:53 pm

Tom, you write that “It is common sense that the war in Iraq has reduced terror in the U.S. relative to what it would have been.” My question for you is, “What would have been the level of terror in the US, had we not invaded Iraq?”

I can understand how invading Afghanistan and capturing Osama bin Laden can reduce terror. I don’t understand how the risk of terrorist attack was reduced by our invasion of Iraq. I’ve heard the argument, “Its better to fight them there, than to fight them here.” However, there were very few terrorists in Iraq until we deposed Saddam and turned the country into another lawless failed state. Would it not have been easier and faster to attack and kill the terrorists in their original base, namely Afghanistan?

Rohit November 17, 2007 at 4:05 pm

Xmath, you wrote: “No, it doesn’t quite work that way. If it did, Congress “could have” spent a trillion dollars in every single non-war year – 1997, say – and Tyler’s “opportunity cost” critique would equally apply. Why didn’t Congress spend those trillion dollars in 1997 that we saved by not invading, oh, Hungary?”

Perhaps because Congress didn’t have the money to spend. Its well known that the only reason we’ve been able to finance the war without tax increases is because other countries (like China and the EU nations) have been willing to buy our debt. The cost of the war should include the interest on all the money that we borrow to pay for the war.

David Johnston November 17, 2007 at 4:28 pm

xmath: Not every article or critique requires quantitative analysis, since either such analysis is unavailable (do you really think Iran will explain truthfully to us their rationale goals). Many intelligent can use their experiences and LOGIC to build plausible scenarios or EXAMPLES. One example is better than none and if no-one is thinking about opportunity costs then none is what you have.

Tyler didn’t mention it but “doing nothing” is a valid opportunity cost and in this case doing nothing would result in NOT accumulating an additional X amount in national debt and thus avoid those interest payments. Another example, infinitely more exist.

You criticize the his letter but apparently do not fully appreciate WHAT Tyler is trying to convey, though from his initial and final comments I would suppose that its more about bringing to light the KINDS of economic thoughts that were lost when the President dismissed his economic advisor. Bush is neither, from that action alone, appears neither willing nor capable to consider and discuss the war and policy within an economic frame of reference. The Sunday WP forum is NOT the place to go into a full-fledged debate but instead is a forum for bringing awareness and sparking thoughts in people.

xmath November 17, 2007 at 5:10 pm

Rohit:

Perhaps because Congress didn’t have the money to spend.

Quite. In which case spending it wasn’t an ‘opportunity’ we passed up, in the first place. Similarly for 2003. Which was my point.

David Johnston:

Not every article or critique requires quantitative analysis

Indeed. But it would be better if people making critiques that aren’t based on quantitative analysis wouldn’t posture as if they were, and wouldn’t couch their statements in terms of phony “probabilities” and “likelihoods” in an effort to give them added, pseudoscientific weight. To write an article saying baldly “My opinion is that we should not have invaded Iraq” is at least honest and forthright. To append an incoherent but superficially-quantitative “…because it has increased the probability of a terror attack” or “…because it has made NK/Iran more eager to pursue nukes” is a cheap effort to dress up opinion as Analysis while adding no new substantive content of any kind that doesn’t dissolve into fluff on even the slightest inspection.

Rohit November 17, 2007 at 5:19 pm

thehova: “Today, a majority of the US population supports strikes against Iran.”

Supporting evidence please. As far as I heard, the fervor for war amongst the American people isn’t nearly as high for Iran as it was for Iraq. I think this is partially because, with Iraq, we’ve seen what a war costs, and because we’ve realized that wars require far more investment than thought in order to realize promised gains.

thehova November 17, 2007 at 6:58 pm

Here’s a news story on a recent zogby poll which says a majority of Americans would support a strike on Iran.

http://publiuspundit.com/2007/10/majority_supports_striking_ira.php

I don’t buy the arguments that Washington will be more timid/restricted on the world stage.

Thehova November 17, 2007 at 7:46 pm

yes, BK, Ships would be a tiny percentage of GDP also.

I agree. But I don’t agree with Tyler’s logic: well, if we didn’t spend the money on Iraq we could fund….

Why don’t we fund Ship? It has more to do with the pressure from insurance companies than the Iraq war.

Kathy November 17, 2007 at 8:21 pm

Tom asks: “How may World Trade Centers have collapsed since the Iraq war started?”

Spencer points out that “There have been major terrorist attacks in Indonesia, Spain, England & Egypt.”

Tom replies: “Terrorist attacks in other civilized countries are a reason to escalate our military interventions, not abandon Iraq.”

This is a good example of why Tom’s initial argument — which other war supporters bring up as well — is so flawed. If the standard for claiming success in Iraq is that there have been no additional 9/11’s since the U.S. invaded that country, then it would be logical to assume that an *increased* number of terrorist attacks would be the standard — or at least a significant standard — for declaring that the Iraq venture has failed.

But Tom, here, tells us that the *lack* of new terrorist incidents is proof that the Iraq war is successful, AND he tells us that the *increase* in new terrorist incidents (when that increase is pointed out to him) is *also* proof that further Iraq-type wars are necessary.

So basically, if terrorism decreases, that is proof that going into Iraq was the right decision. And if terrorism increases, that is also proof that going into Iraq was the right decision.

Nice work, if you can get it.

David Johnston November 17, 2007 at 9:08 pm

xmath: I agree that his points, as stated, fail in the “analysis” regard, all I am saying is that FOR THIS SPECIFIC PIECE OF WORK that such support is unnecessary to explicitly include.

While we cannot know whether or not Iran/NK is more or less inclined to pursue nukes in the present than in the past, Tyler asserts that our GOAL is to reduce their inclination to acquire nukes. So, how have our actions to date faired according to this measure. Tyler states/feels that our actions to date have in fact increased such a desire. Can he prove this, maybe (he didn’t attempt to do so in this piece) but if we assume the goal is indeed valid/true can the administration prove that, either, Iran/NK’s desire to acquire nukes has decreased UR that some other goal takes precedence (or has a greater net value) than non-nuclear proliferation.

This is not the place (nor am I the person) to lay out the various assumptions that are being made to state that our actions to date in Iraq have in-fact, relative to the moment before we declared war, increased the global propensity for nuclear proliferation. But without such assumptions and defined time frames, as well defining possible externally observable measures, such an argument for or against cannot be made. Now, whether anyone will actually address this and many other points remains to be seen.

So yes, these issues CAN be discussed and, through that discussion, help us to better understand how our actions affect the decision making and feelings of others. Because you do not feel that those assertions made by Tyler (and others) are defensible (and are not defended immediately in the context they are presented) you should not assume that other cannot in-fact defend their position when it is a lack of imagination on your part and a lack of effort (or space) on theirs to actually present a proper defense.

iraqwarnotright November 17, 2007 at 10:04 pm

Im rell glad to here of your writing against the WAR OF IRAQ WHICH WAS WRONG.

That UR wrining get’s lot’s of attention. against war of IRAQ

WAS WRONG.

Randy (Internet Ronin) November 17, 2007 at 10:29 pm

Tyler: While you make some excellent points, almost all of which I agree with, the prose struck me as bordering on juvenile snark. Up until the end, when you threw caution to the wind and reveled in it. As an admirer, one who enjoys your books, and a frequent lurker here, this is far and away your most poorly written article.

qingdao November 18, 2007 at 12:06 am

So Iraq hawks (like Prof. Cowen)argued that we needed to take out rogue regimes (like Saddam and the Taliban)lest they give WMD to terrorist groups. Ah! Here is where slow-witted George made his fatal blunder. He failed to perceive the unseen future opportunity costs. Are you sitting down? Failing this time will make it harder next time. “The bottom line is clear, Mr. President” (intones the distinguished professor to a hushed Oval Office, placing his copy of Nation in his old, worn, leather briefcase) and we return to more important blogging: the Catalan novel, the Prudie column, grocery stores in poor neighborhoods and “who waits longest for coffee.”

Noam Fischman November 18, 2007 at 7:13 am

Tyler, Great article! But, what is really required is a cost benefit analysis, not just an analysis of the costs.

Obviously, the benefits are difficult to substantiate and quantify, but they should at least be discussed when considering costs.

Was your omission of any benefits meant to suggest that there have been no benefits?

Tyler Cowen November 18, 2007 at 8:33 am

Thanks for all the comments. It’s worth noting that different publications..um…edit their authors very differently…

odograph November 18, 2007 at 10:00 am

There was an old poll, in the days of Bush v. Kerry, that asked:

1) who do you support?
2) have you traveled internationally?
3) what kind of car do you drive?

There were some surprisingly strong correlations. People who had traveled internationally were much more likely to support Kerry, as were people who drove convertibles.

It was the convertible thing that really drove the idea for me that this was about fear, of the unknown, and how you respond to it.

If you ask a fair question (noting the likely outcomes) about bombing Iran, I think you’ll find that again. People with an insular and fearful outlook will want to lash out … even when they know that success is not assured. They will want to reduce the risk, even when they really know they cannot.

I’m sorry. Terrorist attacks are small odds events which are usually prevented. Basing policy on what is really noise, the small odds events that sneak through is not rational. It is all about irrational fear.

xmath November 18, 2007 at 10:26 am

nyongesa has somehow divined that I “begin [my] terrorism defense narrative with 9/11 as timeline zero” and used that as a springboard for his epic post. Not sure where he got that, perhaps just made it up, since I wrote here absolutely nothing about either 9/11 or terrorism defense per se. Looked like a fun post to write, though.

Jeff Brown November 18, 2007 at 3:08 pm

I would quibble, Tyler, with your use of the idea of opportunity cost. For instance, you write that when we consider the people who died, we have to consider whatever they would have contributed to society. But that’s already what you’re doing when you think about the cost of death. If that part of your article helped someone understand the human cost of the war, it’s not because they were looking at accounting costs rather than opportunity costs; it’s because they didn’t recognize the value of a life.

The same is true of your statement that the trillion we’ve spent on Iraq could have funded the DHS 28 times over. If that part of your article helps someone understand the cost of this war, it’s not because they were “only” considering the money. They’re concerned about the monetary loss precisely because there’s other stuff we could have bought instead. For your article to have helped them understand the cost of the war, it would have to be that they don’t understand the value of a dollar.

That said, I think people in fact don’t understand the value of these dollars that government is spending, because they don’t know how much other government programs cost. So I think you did help them understand these costs. I’m just quibbling with terminology.

mthomas November 18, 2007 at 5:50 pm

Mike Linksvayer,

Why does the example need to be turned around to make the point. I can accept that your version of the story advances the same point. By putting the decision into the hands of a single person, Lincoln, I asked a question which it seems you would agree with me on the answer. I am not sure then how you claim ground for a “should” here.

I think people have more sympathy with what has come to be known as Mr. Lincoln’s crusade to end slavery. I would think you hard pressed to find a cause of Mr. Davis which would resonate or be useful in comparing to Mr. Bush’s emotional appeal to advance the flag of Democracy through force. I will be interested to see if you can think of one where I cannot.

Zaoem November 19, 2007 at 9:03 am

The use of oppportunity costs is tricky because all the other things we “could” have done also have their own opportunity costs. Moreover, some of these would also have considerable externalities. Consider #2, “securing” our ports against nuclear terrorism. A simple nuclear weapon is so small that the probability of catching it in a port is very small even if we increase inspections tenfold. Moreover, it raises the cost of shipping (delays) for all goods. Instead, we “could” have spent these dollars bribing other countries to better protect their nuclear materials.

Kris November 19, 2007 at 11:59 am

If I were to pursue a PHD in economics, I might choose to write my dissertation on the costs and benefits of the Korean War (50-53). Many lives lost, lots of money spent and in the end no ground gained but the South Korean people are essentially free while the people in the North remain starving under a brutal dictatorship. South Korea’s GDP is ~$1.2 trillion and North Korean’s GDP is ~$40 billion. South Korea’s population is ~49 million; North Korea’s population is ~23 million. The difference between the two countries equally devastated by war could not be greater. Freedom is not free but the cost of war may be worth it. This is something to consider when making decisions about Iraq and what we want it to be like 50 years from now, which is the kind hindsight we have with Korea.

Alistair November 19, 2007 at 3:30 pm

This is the first article by Tyler I think I’ve really disagreed with.

I’ll pass on some of false dichotomies offered in the first few points and concentrate on the hot potato of Iraq casualties: [Up front disclaimer: I work in public policy research; a statistician with a specialisation in Iraq. People in khaki uniforms are sometimes involved.)

Look, I know we’ll argue about this one until we are blue in the face, but for what it is worth no-one in my industry believes the Lancet outlier (method sound; but terrible and possibly fraudulent implementation). And, God-damn-it, we want, we need , to know the truth as much as anyone. Best guess “in-house”? 80-300k. More honesty: no-one is too sure. We do know 80-90% are victims of sectarian violence with no coalition involvement. I imagine there will ultimately be an accounting, one way or the other, but in the interim, perhaps we could all avoid taking our ignorance out as frustration on others.

But let me take my stats hat off for a moment and wonder does it matter for our discussion? Opponents of the war should be able to make a moral case with 100k deaths as readily as with a million. Likewise, if the struggle is morally justified, then each death, though regretted, is no cause for moral censure of the US/Coalition. Or did Tyler become a utilitarian when I wasn’t watching?

Libertarians should assign moral guilt only for actions having forseeable consequences undertaken with malice. You can’t hold a country responsible for the barbarism of other agents. In in wider sense, there are some interesting problems for libertarians here about the extent you can endanger other agents whilst legitimately defending yourself; but I don’t think the debate ever gets that far.

B.H. November 19, 2007 at 5:52 pm

Tyler,

Magically, you are the economic and foreign policy adviser to FDR on January 1, 1942. You really do have perfect sight. FDR is determined to defeat Japan, Germany, and Italy, all of whom have declared war on the USA. You compute the present value of expenditures, including loss of life and limb, to all the nations of the world of fighting World War Two. Express it as a percentage of current year GDP. What is that number?

Now what do you advise FDR to do? (1) Fight and win, as the USA did. (2) Negotiated peace agreement in which the USA makes all necessary concessions to the Axis powers. Defend your choice in the same style of analysis that you analyzed the Iraq War.

AKecon November 20, 2007 at 4:16 pm

Personally, I see it as the great tragedy of our time that over $1.3 trillion was spent on this war when we could have used that money to:

– Lower our dependence on foreign oil (instead of paying dearly to secure a little more)
– Develop solar/cellulosic ethanol/battery/biodiesel/wind/geothermal technologies.
– Better educate our young people (who are falling behind other countries – especially in math and science programs)
– Finance programs to build better/cleaner power plants.
– Fund state/national government agencies which are often overlooked but play a critical role. Even if that funding doesn’t go towards jobs, it could have gone towards upgrading technology so that the department has the means to do more with less. Currently, they are told to do more with less, with the same equipment/people/systems/regulations. It’s possible to do more with less, but only if upfront investments are made, or if regulations/expectations change.
– Could have re-built Afghanistan properly. Mandating womens’ rights and offering state-sponsored employment opportunities for progressive muslims. Giving progressive muslims access to a good job/lifestyle and funding that country as a model for the region (equal freedoms/progressive programs/secular government) would go a lot farther towards changing the middle east than taking down Saddam.
– Or give every man/woman/child a check for $4,288. That’s the about the cost, so far, of the war.

xmath November 21, 2007 at 10:41 pm

No, but you might be. Who exactly of importance claimed that Saddam Hussein had nuclear weapons? What substantive claim or public policy position hinged on his having had nuclear weapons?

Maybe I should ask it this way: do you know what nuclear weapons are? what “had” means?

Caped Crusader November 21, 2007 at 11:32 pm

I understand you are being purposely daft regarding what “WMD” represents in this run-up to the war.

You will claim that WMD refers only to biological weaponry, ignoring the fact that the prelude to this war was El Baradei’s being disallowed from inspecting suspected nuclear sites per UN resolution.

xmath November 22, 2007 at 8:40 am

and P.S. we weren’t talking about “WMD”. We were talking about nuclear weapons. Because this all started when you poo-pooed “the probability that Saddam Hussein had nuclear weapons”, and I pointed out this was a weird comparison.

Because, again, no one of importance claimed that Saddam Hussein had nuclear weapons and no substantive claim or public policy position hinged on his having had nuclear weapons.

Do you understand yet?

ac March 17, 2009 at 4:51 am

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