The less than 3 trillion dollar war

You will recall that Joseph (rhymes with Twiglets) Stiglitz has published a new book arguing that the Iraq war has been a huge economic disaster, costing $3tn dollars. (Here's a summary of his argument).

This is likely to be very influential. Once you get a number out there people anchor to it. They may produce a number less than 3 trillion but it will always be of that sort of magnitude.

Now Amity Shlaes takes issue with Stiglitz. Rather convincingly in my opinion.

She says his book makes two major errors. First, he massively overestimates the impact of the Iraq war on the price of oil. And second, he doesn't properly account for the cost of the alternative policy of containment.

Besides, if you use:

the standard method of calculating costs of wars, defense spending as a share of gross domestic product, Iraq's price is improbably modest.

Comments

[Richard Young]

By "the standard method of calculating costs of wars, defense spending as a share of gross domestic product, Iraq's price is improbably modest." Oh dear, oh dear. When the defenders of the war resort to its relative costs to defend its legitimacy, you know they're in trouble.

Point is, this is a war of choice. You can make a convincing argument that Afghanistan isn't: terrorist training camps and a regime actively hostile to Western interests make a reasonable causus belli. But Iraq certainly was "discretionary". It's like arguing that an alcoholic's spending at the off-licence is improbably small compared to their outgoings on their mortgage. They're all cheques, right?

As to Stiglitz - well, economists never have a real answer for anything. So I'd take *any* exact figure for the cost of the war with a pinch of salt. Could that money - even if it's only $1trn - have been better spent in other ways? Could it even have been spent more effectively on securing US/Western security vis-a-vis the Islamic world without resorting to war? Hell yes! So he's right: economic *and* strategic disaster.

Of course, Amity (and Stiglitz?) chooses not to account for the blood that's been spilled...

[Ian]

"standard method of calculating costs of wars, defense spending as a share of GDP" not according to any economics textbook that I have ever read. The MARGINAL cost of a given war is precisely the type of estimate that Stiglitz has tried to estimate. You may differ with him on his estimates of given costs but at least he has tried to estimate the total costs rather than trying to fudge the figures as the Bush Administration has done. The percentage of defense expenditure to GDP is an AVERAGE cost of defense expenditure to give a comparison with other countries not in any way an estimate of the total costs associated with a given war.