Is the Iraq War Costlier Than Doing Nothing?

The Democratic study on the "real costs" of the wars in Iraq ($1.3 trillion) and Afghanistan ($300 billion) from 2002 through 2008 will almost assuredly lead to a common perceptual pitfall. An explanation: Let's assume that the numbers on Iraq are more or less accurate. And let's stipulate for a moment that when you take into account "hidden costs" such as interest payments on new debt to pay for the war, the expense of long-term healthcare for our injured warriors, and the impact of higher oil prices, the total cost of Iraq is indeed twice what the White House has requested from Congress.

Should we then assume that by not waging the war, Uncle Sam would be a trillion dollars to the better? That would be a questionable assumption, a product of a sort of "static analysis" that assumes if you change one critical factor, all the rest stay pretty much the same. Professional futurists, like the ones at the Big Oil companies, know better than that. They give clients a range of scenarios based on different values for different variables. And that is also what three economists at the University of Chicago's business school did in 2006. They looked at the costs of not going to war with Iraq back in 2003. Their study instead examined the costs of containing Iraq.

Advocates for forcible regime change in Iraq expressed several concerns about the pre-war containment policy. Some stressed an erosion of political support for the containment policy that threatened to undermine its effectiveness and lead to a much costlier conflict with Iraq in the future. Others stressed the difficulty of compelling Iraqi compliance with a rigorous process of weapons inspections and disarmament, widely seen as a critical element of containment. And others stressed the potential for Iraqi collaboration with international terrorist groups. To evaluate these concerns, we model the possibility that an effective containment policy might require the mounting of costly threats and might lead to a limited war or a full-scale regime-changing war against Iraq at a later date. We also consider the possibility that the survival of a hostile Iraqi regime raises the probability of a major terrorist attack on the United States.

Factoring in all those contingencies, the authors find that a containment policy would cost anywhere from $350 billion to $700 billon. Now when you further factor in that 1) a containment policy might also have led to a higher risk premium in the oil markets if Iraq was seen to be gaining in military power despite our efforts to box it in, and 2) money not borrowed and spent on Iraq might well have been spent on something else given the White House's free-spending ways, it's easy to see that doing a cost-benefit analysis on "war vs. containment" might have left administration officials with no clear-cut economic answer. (The GOP counter to the Dem proposal can be found here.)

Of course, the White House apparently didn't even bother to do such a cost-benefit analysis. And had it done so, the results should hardly have been the determining factor whether to wage war or not. As U.S. Court of Appeals Judge Richard Posner notes in his blog with the University of Chicago's Nobel Prize-winning economist Gary Becker (neither gentleman participated in the Iraq war study),

All this said, I do not think a decision to go to war should be based on cost-benefit analysis. It would terrify the world if powerful nations conducted cost-benefit analyses of whether to go to war. There are 192 nations besides the United States; should we ask the Defense Department to advise us which ones we should invade because the expected benefits would exceed the expected costs? Might a conquest of Canada produce net benefits for the United States?

You know, those Canadian tar sands do look awfully inviting...