War in Iraq versus Containment

Steven J. Davis, Kevin M. Murphy, Robert H. Topel

NBER Working Paper No. 12092
Issued in March 2006
NBER Program(s):Economic Fluctuations and Growth, Public Economics

We consider three questions related to the choice between war in Iraq and a continuation of the pre-war containment policy. First, in terms of military resources, casualties and expenditures for humanitarian assistance and reconstruction, is war more or less costly for the United States than containment? Second, compared to war and forcible regime change, would a continuation of the containment policy have saved Iraqi lives? Third, is war likely to bring about an improvement or deterioration in the economic well-being of Iraqis? We address these questions from an ex ante perspective as of early 2003.

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.

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Document Object Identifier (DOI): 10.3386/w12092

Published: Guns and Butter: The Economic Causes and Consequences of Conflict, CESifo Seminar Series. Cambridge and London: MIT Press, 2009.

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