William Nordhaus hears the “drums of war” beating as the United States debates an attack on Iraq, but he would rather be listening to another sound: that of the Bush administration’s number-punching as it computes the costs of such a conflict.
In a lecture Monday before an overflow crowd at Luce Hall, Nordhaus, a Sterling Professor of Economics, noted the lack of public discussion concerning economic consequences of war in Iraq. To fill this gap, he proposed his own estimate of these costs, which he said could total “$1,600 billion” in a worst-case scenario.
Drawing upon a month of research, Nordhaus emphasized that the only economic estimates thus far — one by House Minority Leader Richard Gephardt, the other by the Congressional Budget Office — are incomplete because they do not fully consider the “follow-on” costs of the war.
“The U.S. has pretty ambitious plans for Iraq for after the war,” Nordhaus said. “Assuming we want no Saddamites after Saddam, there will need to be substantial occupation [and the American] people are not at all prepared for this occupation.”
He said the costs of a post-war American occupation and peacekeeping effort in Iraq could range from $75 to $500 billion, depending the mission’s duration.
Nordhaus also faulted the government estimates for not considering the possibility of a “long and protracted” war. Instead, he said, these calculations were based solely on the scenario of a quick and easy victory — and the difference between these two possibilities is the difference between a total cost of $121 billion and that of $1,600 billion.
In calculating this total cost, Nordhaus said he considered not only direct military spending and the costs of occupation, but also those of reconstruction, nation-building and humanitarian assistance. He also included the possible impact on oil markets and the U.S. economy.
He also considered Iraq’s oil resources, which amount to 10 percent of the world’s reserves. He concluded that with a short war, oil prices would not be cut dramatically. A prolonged conflict, however, would have significant effects on oil prices, he said.
Citing historical examples, Nordhaus cautioned that even his highest total estimate could be far below actual costs.
“In the Civil War, Union estimates were one-twelfth [of the actual cost]. In Vietnam, it was one-ninth. In World War I, it was one-fifth,” he said. “The syndrome of underestimating the costs of war is seen all over the historical record.”
School of Management professor Douglas Rae, who spoke after Nordhaus, said it is necessary to consider other costs as well: the cost of not going to war and the cost of victory.
“What worries me is that these costs seem implausible to me — [they] make it seem beyond imagination that we would stick in and endure costs like these for decades,” he said.
“What is the cost–when you fail to govern, fail to bring a new peace to the conquered country?” Rae added.
Billy Parish ’04, who attended the lecture, said he was glad to hear an expert analysis of economic consequences.
“My main concern about the war was the costs,” he said. “When I was in D.C. this weekend, [co-founder of Ben and Jerry’s] Ben Cohen was citing $200 billion as the cost–I didn’t think he pulled it out of nowhere but I’d rather hear one of the top economists in the country talk about it.”
“It’s exciting that professors here are getting into the debate and providing useful research,” Parish added.