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The Economic Costs of the War in Iraq


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  • Kosec, Katrina
  • Wallsten, Scott
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    Government policies are routinely subjected to rigorous cost analyses. Yet one of today’s most controversial and expensive policies—the ongoing war in Iraq—has not been. The $212 billion allocated by the U.S. Treasury has been widely reported. But the real, direct economic costs include more than budgetary allocations. Other costs include lives lost, injuries, and lost civilian productivity of National Guard and Reserve troops mobilized for the conflict. The conflict, however, also has generated cost savings, especially in terms of resources no longer being used to enforce UN sanctions and people no longer being killed by Saddam Hussein’s regime. In this paper we monetize these direct costs and avoided costs of the war in Iraq, both to-date and the total expected net present value of costs through 2015. Our estimates are imprecise. The data are not of high quality and every calculation requires a number of assumptions. In addition, we do not calculate indirect effects of the conflict, such as its impact on oil prices or other macroeconomic impacts, or certain intangibles, like the benefits of a stable democratically elected government in Iraq, should one emerge. Nonetheless, our best estimates suggests that the direct economic costs to the U.S. through August 2005 are about $255 billion, about $40 billion to coalition partners, and $134 billion to Iraq. These estimates suggest a global cost to date of about $428 billion. The avoided costs, meanwhile, are about $116 billion. We estimate that the expected total net present value of the direct costs through 2015 could be $604 billion to the U.S., $95 billion to coalition partners, and $306 billion to Iraq, suggesting a global total expected net present value of about $1 trillion. The net present value of total avoided costs, meanwhile, could be about $429 billion.

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    Bibliographic Info

    Paper provided by Regulation2point0 in its series Working paper with number 42.

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    Date of creation: Sep 2005
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    Handle: RePEc:reg:wpaper:42

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    1. Hahn, Robert W. & Tetlock, Paul C., 1999. "The Economics of Regulating Cellular Phones in Vehicles," Working paper 526, Regulation2point0.
    2. Steven J. Davis & Kevin M. Murphy & Robert H. Topel, 2006. "War in Iraq versus Containment," NBER Working Papers 12092, National Bureau of Economic Research, Inc.
    3. Jason Bram & James Orr & Carol Rapaport, 2002. "Measuring the effects of the September 11 attack on New York City," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 5-20.
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    Cited by:
    1. Steven J. Davis & Kevin M. Murphy & Robert H. Topel, 2006. "War in Iraq versus Containment," NBER Working Papers 12092, National Bureau of Economic Research, Inc.
    2. Delucchi, Mark A. & Murphy, James J., 2008. "US military expenditures to protect the use of Persian Gulf oil for motor vehicles," Energy Policy, Elsevier, vol. 36(6), pages 2253-2264, June.
    3. Thomas J. Kniesner & W. Kip Viscusi & Christopher Woock & James P. Ziliak, 2006. "Pinning Down the Value of Statistical Life," Center for Policy Research Working Papers 85, Center for Policy Research, Maxwell School, Syracuse University.
    4. Edwards, Ryan D., 2014. "U.S. war costs: Two parts temporary, one part permanent," Journal of Public Economics, Elsevier, vol. 113(C), pages 54-66.


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