Monday, March 22, 2010

The Nuclear Equivalent to the War on Terror

All the money spent in Iraq and Afghanistan represents resources destroyed. How much, in terms of real resources, does $1000 Billion represent. Let's do residential. Say $140K per house, on average,which isprobably generous. That's about 7 million houses. The equivalent value of 7 million houses which is not being invested, rather is being destroyed in warfare. 7 million houses which are not being built.
7 million houses figure 4 persons per house, 28 million people. So the residential equivalent of a several very large cities has being leveled. This kind of calculation has been done, more accurately and in greater detail, both nationally and for the share of one's locality, and can be found by searching in say: 'cost of the war in Afghanistan'. Nobody is being hurt though. But:
Let's look at it in terms of man lives. Average GDP per worker is roughly, $14T/140M in the labor force, these days gives $100K per worker. So the cost is 10M man years. Figure 40 years productive life: $4M per life. So: $1000B/$4M = 250K lives. So the war on Terror has destroyed the lifetime production of 250 thousand men. Economically speaking, these are the casualties the US has sustained.
Let's check the nuclear option. When you nuke a city, you destroy only half the lifetime productive capacity of the population (half has already been contributed) so DOUBLE the number of people killed. Figure 500K. Note we are now considering everyone in our city as labor or potential labor. Now the total capital of the US is about $50T. Divide by total people (300M) and you get about $170K per person, of physical capital, that is houses, factories, offices, roads, utilities, etc. they occupy and use. An interesting number in its own right. But we'll use $200K. So that's $100B worth of capital our 500K people occupy and use. (200K x 500K.) Figure $100B to be the equivalent of 25K man lives. ($100B/$4M = 25K man lives.) We subtract 25K man lives because we're blowing up their productive lives equivalent in material destruction, giving 475K. We're subtracting it because we don't want to count it twice. But we see that counting the actual material that is blown up is just a small correction. We can just as well ignore it, given the approximate nature of all our numbers
So, roughly, the War on Terror has, so far, cost the economic equivalent of the total destruction of a city of 500 thousand people. Give or take. That's everyone and everything in it. That's a lot of terrorism. Of course ‘economic equivalent’ does not include pain and suffering. Or cleanup.
Most of the numbers we've used understate the answer. One can argue that we understate the earnings per man life, but don't forget capital is spent on the individual at both the beginning and end of his life, so the net contribution of a person to society is probably considerably less than 40 years of labor.
By our calculations 9/11 resulted in the destruction of something under 5 thousand man lives of production. The War on Terror is, it seems, a rather disproportionate response. But then, one can always claim WWII was a disproportionate response to Pearl Harbor.

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