Notes on the Atrocities
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Friday, March 07, 2003  

Cost of War (in dollars)

A couple of nights ago, the Newshour with Jim Lehrer did a wonderful piece on the economic cost of war. They spoke with William Nordhaus, who based his calculation on invasion and occupation, over the course of a ten-year period. He included variables for a number of possibilities, including direct costs, the effects on the economy, the price of gas, and rebuilding torched oil fields. Some of these were positive or neutral in best-case scenarios. The bottom line? Well, wait a minute, how about some interesting numbers first.

Nordhaus has the report online, so I checked it out. Some fascinating numbers included past costs of war. The Revolutionary War cost 2.2 billion in today's dollars, which was $447 per capita, and was 63% of a single year's GDP. Compare that to WWII, which cost 2.9 trillion, or 20,000 a head, and was 130% of GDP. And the last gulf war? Seventy-six billion--just 1% of GDP and $306 per capita.

In terms of economic stimulus, war can--but rarely does--prop up the economy through defense spending. The issue here is that generally war is just too small to contribute to the overall economy. So, Nordhaus includes a figure on the increase in defense spending as a percent of GDP. WWII was the biggie--41%. Korea's was 8%, but after that it drops off: Vietnam just 2%, and the first Gulf War .3%. Nordhaus expects a similarly tiny boost from a second Gulf War.

Okay, back to those figures. I'll quote the Lehrer transcript:

"So, bottom line, in Nordhaus' best-case scenario, cheap oil and lower prices at the pump cancel out some of the war costs, and you get a tab of about $100 billion, some $1,000 per U.S. household.

The worse-case, higher prices at home, more spending abroad, a total of roughly $2 trillion -- $20,000 per U.S. household over a decade."

posted by Jeff | 3:39 PM |
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