News and Views from the Dismal Science

Dr. Econ's commentary on local, regional, national, and global economic affairs

Peace with Iraq for the Cost of Half a Tank of Gas

by Jurgen Brauer, February 2003
Copyright: J. Brauer. No reproduction without permission.

I am an economist. Economists are pretty dull and narrow-minded folks. When decisions, large or small, are to be made we pull out a ledger book. Across one column we write the heading ‘cost' and across another the heading ‘benefit.' Presuming the same benefit to be obtained we also keep, remarkably, a third column, headed ‘cost of alternative option'.

As governments and politicians do, the Bush administration keeps only the first two columns, jointly headed ‘war with Iraq'. On the ‘benefit' side they write things like ‘US national security'. So do I. That they can't quite put a dollar-figure to that is understandable, just like people can't put a dollar-figure to wearing a seatbelt (which is also a safety issue). But when I install a seatbelt in my car, at least I have a good notion of what I should enter on the ‘cost' side. For example, I would need to enter not only the monetary cost but also the value of the relative inconvenience of wearing a seatbelt. And I would also need to consider that feeling ‘safe' induces at least some people to drive more recklessly which causes more injuries and deaths.

The Bush administration is curiously reluctant to put down a number for 'cost of war with Iraq', let alone to put down a number for 'cost of alternatives to war with Iraq'.
In contrast, the Bush team is curiously reluctant to put down good numbers for ‘cost of war with Iraq'. Not that it is impossible to come up with reasonable estimates. Various people have already done so – depending on the scenario, anywhere from $100 billion to $2,000 billion – but governments tend to focus on projected budgetary outlays as their measure of ‘cost.' Economists differ. As in the seatbelt example, we look at all costs, budgetary and otherwise. For example, the future oil price spike, in case of war, is a cost of war. It is not a US government budgetary cost, but a cost to our society at large and it should be entered in the books. Even the very real budgetary costs of occupying Iraq and staying there for several years likewise have not been entered in the cost column of the ‘war with Iraq' column. In a word, the US government is ‘low-balling' the issue. Essentially, the administration makes the claim that the benefit to be had, US national security, is worth the $100 billion or so cost it actually has entered in its account books. But is the looming war worth it if the tab runs nearer two trillion dollars?

As an economist I will not preach to you what your opinion should be, 'war' or 'no war'? I merely ask that you consider, even if the administration does not, the total bill to be paid.

And then I will ask you, also as an economist, this question: to achieve the same objective – US national security – are there cheaper ways to doing it? I am asking you to fill in the third column: 'cost of alternative option'. For instance, we understand that some countries in the world, Germany and France in particular, urge that UN inspection continue at a somewhat accelerated and intensified pace. The Bush team objects. To see why I don't see why they object, let's run the numbers. Suppose we flood Iraq with 50,000 inspectors, costing about $200,000 each per year (a fairly realistic number based on past UN peacekeeping missions). That'll run to $10 billion a year. The 10-year cost is therefore $100 billion (by which time Saddam Hussein will be old and creaky). Since the Germans and the French are so adamant, let's propose that they share the cost in proportion to their population. Germany 80 million, France 60 million, the US 280 million, that's 420 million. Russia and China are poor, so they and all the others will make token donations amounting to the equivalent of 80 million people for a total of 500 million people among whom to share the 10-year $100 billion cost. That'll be $200 per person over ten years, or $20 per year. That's half a tank of gas at current prices!

You see that costing out the alternatives, for the same benefit, is an important exercise. Even if Iraq is as much of a threat as the Bush administration believes, my alternative is not only cheaper but will put the Germans and the French to the mat as well – are they merely talking, or are they putting their money where their mouth is? 


Dr. J. Brauer is Professor of Economics at Augusta State University's College of Business Administration. He can best be reached via his web site (http://www.aug.edu/~sbajmb).