Costs and Benefits

Sound policy decisions require analysis of both the costs and benefits of a given proposal. Most proposals have some positive benefit, which allows supporters to make arguments along the lines of “Don’t you agree that achieving X is a good thing?” Then opponents have to make a slightly more complex counter-argument along the lines of “Yes, there are benefits to achieving X, but the costs are even greater. Therefore your proposal is unwise.”

This logical shortcoming is starkly illustrated by pro-war advocates who seek to refute criticism of the war, the pre-war intelligence, and the post-war execution by making this argument: “Don’t you think it’s a good thing that Saddam is out of power?” Or the more disingenuous framing, “You would prefer to see Saddam still in power?”

The reply to this is that there are, of course, many benefits to the removal of Saddam and his regime from power. However, that does not remotely begin to imply that removing Saddam from power was sound or wise. It simply means that there is a benefit, B>0, to removing Saddam from power. To come to a conclusion, the costs, C, must also be realistically assessed. Once this is done, the questions of interest are

  • Is B > C? If so, then removing Saddam was a good idea.
  • Is B 0 to justify the invasion is a clear sign of willful ignorance or calculated disingenuity.

In this setting, inaccurate intelligence implies that our pre-war estimates of B were too high. Manipulated and exaggerated intelligence means that over-estimate was intentional. Similarly the “shining beacon of democracy in the Mideast” benefit is also now somewhat questionable. If the US really withdraws in the summer, anything could happen, including a fundamentalist Islamist regime.

What are the costs, C? The direct monetary costs were at least $87 billion last year, and now the administration is seeking another $50 billion. (Which the administration says won’t count against its promise to cut the deficit in half in five years.) Some of that $50b is for Afghanistan, so this is an upper estimate. On the other hand, the White House’s estimates of the costs of things are frequently biased downward — reliably unreliable, if you will — so $50 billion for Iraq is probably about right. Then there are the costs of over 525 dead U.S. soldiers and 92 dead allied soldiers, plus the costs of at least 8,000 Iraqi dead. Then add the intangible cost of lost good will abroad (which is costly since we need their cooperation in the War on Terror.) At last, you have a pretty good idea of what the costs of the war are.

I think reasonable people can disagree about the magnitude of the costs and benefits, though as the costs continue to wax while the benefits wane, it becomes ever more difficult to make the case that the benefits exceed the costs. And the adminstration’s claims about the costs and benefits were systematically and perhaps intentionally biased toward understating the cost and overstating the benefits.

What reasonable people cannot honestly disagree over is the claim that any policy with positive benefits is justified, regardless of the costs. A shiny new $15,000 car for every adult in the U.S. certainly has some benefits. If I make this proposal and encounter some opposition then I can easily reply, “You would prefer that citizens of this great nation not have new cars?” Case closed. Bring on the new cars.

Wait. It would cost about $3 trillion to implement this proposal. Are the benefits of the Angry Bear New Car Plan at least $3 trillion? Probably not. (It would work about as well as Hoover’s Chicken in Every Pot plan.)

Finally, how does this analysis apply to Afghanistan? I think it works rather well. First, the costs were much lower in that instance. Second, the benefits were surely higher. While hard to quantify, the benefits of sending a message along the lines of “Any government that attacks or directly supports an attack on the United States will be eliminated and the perpetrators will be tried and convicted” are extremely high. Certainly they are much higher than the benefits of a message like, “if you annoy us and it strikes our fancy, then you will be eliminated.”