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Stiglitz the Nobelist Gets Math Wrong on Iraq War

Author: Amity Shlaes, Former Hayek Senior Fellow for Political Economy
March 5, 2008


Three trillion dollars is the amount that Nobel Prize winner Joseph Stiglitz puts as the cost of the Iraq war. In a new book with Linda Bilmes of Harvard’s John F. Kennedy School of Government, the Columbia University economist argues that the Bush administration has underestimated outlays for the war by hundreds of billions of dollars.

“The Three Trillion Dollar War” offers a valuable reminder that wars usually cost more than budget figures suggest. Still, the profs are off the mark when it comes to their larger charge that this conflict is necessarily darkening the U.S.’s future.

Stiglitz and Bilmes start with legitimate points. The first is that the administration hasn’t done a good job with numbers. In the run-up to the Iraq invasion, Larry Lindsey, then a top economic adviser to President George W. Bush, dared to hazard that the conflict might cost the egregious sum of $200 billion. Someone or other tried out $300 billion.

Defense Secretary Donald Rumsfeld appeared soon after on television, dismissing numbers in that range as “baloney.” As the years passed, of course, it became clear that even the Lindsey estimate was far too low. Just last month, the Congressional Budget Office said the U.S. has already spent some $750 billion on Iraq, Afghanistanand the war on terror, with more to come.

To arrive at their $3 trillion, Stiglitz and Bilmes start with oil. They carefully note that a good share of the quadrupling of oil prices is a result of non-war reasons such as Chinese andU.S. demand.

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