December 09, 2011

Horse 1256 - The Opportunity Cost of a Decade

So far the war in Iraq has cost this much money:
Iraq War Cost

I'm not going to use this post to discuss whether or not the underlying reason for the war in Iraq was to do with oil or not, but I do wonder about the money which was spent and what would have happened had all of it been used for more profitable purposes.

In economics the term for this is called the "Opportunity Cost". If we assume that money is a finite thing (you can't spend money you've already spent on something else because you've already spent it, DUH), then I wonder what the Opportunity Cost of the War actually is.

The "Dwight D. Eisenhower National System of Interstate and Defense Highways" or more simply the Interstate Highway System of the United States is the largest public works project ever undertaken in history. Even if you adjust the costs for inflation going back to 1956 when it started, you end up with a figure of just over $517 billion. Even with the clock ticking above, the War in Iraq has cost at least one and half times that of the largest public works project ever undertaken in history.
What else could have been done with that money?

Could the United States have had a Universal Health Care System? What about funding research into finding alternative renewable energies other than oil? How would the world have changed if more than $800 billion had been spent on that?

If you adjust for inflation, then the cost of sending 12 clowns to the moon only cost about $99 billion. What sort of advances in space technology could have been made with $800 billion? Would we already have people on Mars by now?
Sure, sending people to the moon was a colossal waste of money but it was probably a more inspiring waste of money than 8 years of needlessly blowing people up.

What's not to say that if Iraq and Afghanistan hadn't been invaded/liberated/whatever you like to call it, that during the Arab Spring of 2011, they wouldn't have decided their own fate for themselves; maybe earlier?

Perhaps the most worrying thing of all is that over the next decade (the tens?) the Baby Boomers in the USA will start to collect on their Social Security benefits. Almost none of the money that will be required to pay those benefits was ever saved in advance. I'm wondering what would have happened if instead of spending more than $800 billion on blowing people up, whether that money wouldn't have been better put to use in training and educating the generation who will be paying for those benefits through their taxation. How much more productive would the population have been if $800 billion had been spent on improving the quality of the labour force instead of the almost negligible benefits of being at war.

Just what was the true opportunity cost of the last decade, and will the next one be a so-called "lost decade" because of it?

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