Wednesday, January 18, 2006

War is hell

The op-ed version of the Bilmes-Stiglitz AEA paper on the costs of the Iraq war ("War's stunning price tag") has been running in various newspapers.

The authors report that a proper economic accounting puts the price tag at much higher than the adminstration has admitted. It is actually in the trillions of dollars and rightly includes the dollar valuation of death and injury.

We are on well-tread cost-benefit ground. First, good CBA is comprehensive and usually comes up with bigger cost figures than those doing the spending. Second, economists place an explicit dollar value on lives lost when many others cannot bring themselves to do so. Finally, economic analysis identifies boundaries between aspects that avail themselves of economic analysis vs. those that do not.

Economists and others can agree that lives lost -- here, there and everywhere -- matter. They can also agree that lives lost today vs. those that may be lost tomorrow matter (although discounting the future may enter).

And this brings us back to where the whole discussion began. What are the losses (among Iraqis and others) vs. the risks from doing nothing?

Many of my friends believe that if we only leave the bad guys alone, they will leave us alone. I believe that many of my friends are wrong to the point of naivete. Let's admit that we have some awful choices: war on our terms vs. war on their terms. And I agree that the conduct of the war on our terms is always an area for discussion.

When we look at big or small government and clean or corrupt government, we are tempted to conclude that there are four cases. A moment's reflection suggests that big but clean is likely to be an empty set. Do governments as we know them conduct wars efficiently? Probably never. This is why we have two bad options.