Monday, March 13, 2006

The Economcis of War

In the latest NBER working paper, Bob Topel, Kevin Murphy and Steve Davis (all of them with the University of Chicago) find that:

"According to our analysis, pre-invasion views about the likely course of the Iraq intervention imply present value costs for the United States in the range of $100 to $870 billion.

Our estimated present value cost for the containment policy is nearly $300 billion and ranges upward to $700 billion when we account for several risks stressed by national security analysts.

Our analysis also indicates that war and forcible regime change will yield large improvements in the economic well-being of most Iraqis relative to their prospects under the containment policy, and that the Iraqi death toll would likely be greater under containment."

However, in an earlier paper, Nobel Prize winner Joe Stiglitz and his coauthor find it costly/uneconomical to wage the war in Iraq.

Who is right?

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