Is the War on Terror worth it? Some math..

Many people think the costs associated with the war on terror has been too high. There are many ways of getting some clarity on the subject, one of them is measuring the socialeconomic alternative cost of how many lives could be sacrificed which would have the same effect. (Take the numbers below with a pinch of salt, they are not the main point.)

First off, I'll need to establish some type of credible socialeconomic cost of the war. Nobel memorial prize winner Stiglitz has provided an estimate of $3-5 trillion, and to make a point which will come apparent at the end I'll use the lower bound - $3 trillion.

Secondly, I'll have to put a number of how much a life is worth. There are many ways of doing it (ask an actuary), but the results tend to come out in the range of $4-11 million per life depending on the methodology employed. Since I used the lower bound earlier, and to make the math easy, I'll use the upper bound here - $10 million.

So, crunching these numbers together - $3 trillion/$10 million - I get 300.000. In essence, the US government should be indifferent between having 300.000 Americans killed or spending $3 trillion on the war on terror. This is the equivalent to the population of a smaller US city. However, this cost has been borne over 10 years, thus it would equate 30.000 deaths per year, the equivalent to an average small town being wiped off the planet per year.

Breaking it further down to a monthly basis (and with some very creative rounding) it's pretty much the equivalent of avoiding a 9/11 per month.

Too costly or not too costly? You may judge for yourself. :) 


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Comment by Albert Bakker on September 13, 2011 at 2:51pm

The American lost about 6.000 lives and 43.000 are wounded or disabled. Let's count those disabled for a million dollars, what the hell 2 million dollars then the costs in money would be 6.000 times $10M + $2M times 43.000 = $60B + $86B = 146 billion dollars.

I will use the much more conservative estimate on of 1.249 billion dollars. So the wasted extra 1.103 billion dollars must then have saved the lives of 110.300 Americans or about 37 successive 911 events to play even.

Instead it payed for the murder on 130k Afghan and Iraqi lives, men, women and children and untold hundreds of thousands of permanently disabled, wrecked lives.

And it is still gone.

Comment by Arcus on September 14, 2011 at 2:42am

The $10 million is not measured as a person's expected tax revenues as this would be a very poor proxy, and quite often zero or negative... Even dismal scientists don't like placing the price of a human life at a negative number. ;)

There are a number of ways coming up with such a number, though one of the more common approaches is the individual's behavior in the insurance market, usually the amount of life insurance multiplied by the mortality index. I.e. if you have a policy that pays out $100k at your death, and there is a 1% chance of mortality, then you have priced your own life at 100k/0.01=$10m.

Another way would be to measure the contribution to society, i.e. GDP*(1+r)*Avg. remaining life expectancy, then discounted at an appropriate rate.

Shadow costs can also be used. Take the turn right on red rule. Let's say each turn saves 1 cent in gas and that each 1 billion right turns an infant die. An infant life would then carry a shadow price of $10m.


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