Opportunity costs redux (crosspost from CT)

Harry Brighouse has a question about my post on consequentialism and opportunity costs, as applied to the Iraq war, which raises a couple of important points about consequentialism, and also leads me to suggest a specific correction to my post on this topic.

The first is a general one, which is obviously inherent in the notion of opportunity costs, but also arises with consequentialism in general, namely that, when we are evaluating a course of action, the question is always “compared to what�. This is, I think, a strong point for consequentialism as a way of assessing public policy, since that always involves a choice between feasible alternatives. By contrast, in a theory of individual morality, it’s often sufficient to divide actions into “permissible� and “impermissible� and leave people to choose whatever permissible action seems best to them.

The second question, is “who is supposed to be applying the theory�. As Harry says, the question “Is X a good thing� depends on “What alternative Y could I promote�, and so depends on the position we are assuming.

Now let’s start thinking about the war. As Harry says, the obvious interpretation of my post is that I am advising the Bush Administration, but assuming that they have suddenly acquired an interest in the welfare of the American public. I think, though, that my analysis would be a reasonable one for a member of Congress proposing an amendment to measures authorising the war and the associated expenditure.

Supposing we are looking at things from the position of the British and Australian left, as Harry suggests. I think the opportunity cost analysis applies pretty well to the expenditure by the British and Australian governments. The Australian government estimated costs of $1 billion, and it’s always short of money for health. So we can estimate that it could have spent the money on health, with an implied saving of 100-200 lives. Alternatively, if you agree that Australian public expenditure priorities aren’t radically skewed, you can say that if the money wasn’t spent on health, it would probably have been spent on something equally valuable at the margin (say education, or firefighting). I assume much the same would be true to the UK.

But if we want an analysis that doesn’t rely on some particular position from which choices are being made, it would be good to have a neutral alternative assumption. This kind of problem comes up all the time in policy modelling: if your policy option increases government revenue, what should you assume about the way that revenue is allocated?

Given the performance of the Bush Administration so far, it is tempting to agree with Harry that any money saved from the Iraq war would have been wasted elsewhere. But I think this is incorrect, in part because there’s no sign that the Bushies recognise a budget constraint. For them, the war is free: it isn’t even included in the regular Budget which is, in any case, massively in deficit with extra items regularly added to the slate. The bills will have to be paid in the end, but there’s no easy way to predict who will pay or in what form.

This suggests to me that a reasonable neutral assumption (fairly common in economic modelling) is that US consumption will be reduced, proportionally across the board, to meet the financial cost of the war. That means about 75 per cent of the cost would be private consumption (foregone tax cuts, if you like), of which about half would be borne by the top quintile. About 15 per cent would come from health (public and private) and more from other desirable forms of spending.

A fair slab, as Harry says, would come out of luxury spending for the well-off. Pro-war British lefties are I think, entitled to disregard this component of the cost, consistently with their general views, while Bushies and libertarians are not.

So, a more careful analysis would certainly qualify the argument I put forward last time, but would not eliminate the general point that war is always costly in blood and treasure, and needs large and clear benefits if it is ever to be justified.

19 thoughts on “Opportunity costs redux (crosspost from CT)

  1. The Australian government estimated costs of $1 billion, and it’s always short of money for health. So we can estimate that it could have spent the money on health, with an implied saving of 100-200 lives.

    Pr Q simply assumes, without argument, that Howard’s military assistance to the US military in Iraq has provided no benefits to AUS national security and consequent human utility. But this glib assumption is empirically false. There were likely opportunity costs for AUS in not providing martial assistance to the US in Iraq.

    The AUS-US military alliance is an insurance policy that has paid handsome economic dividends to AUS over the long term. The alliance has brought about a large implied saving of money and lives to Australians and those other nations that gain shelter from it.

    Once every decade or so the ADF provides some modest assistance to a US military coalition. In return we get the continuing security benefit of being closely allied with the world’s greatest military power which means we can keep defence expenditure within reasonable limits, given our large territorial size and insecure geo-political region.

    After all, the AUS-US military alliance did constrain “Nipponese” fascism and “Sinoid” communism from making much greater gains in our region during the 1941-79 period. This probably saved more than a few hundred lives per annum, not least Australians, given the democidal fury of fascist and communist aggression.

    There are also social benefits to the US alliance. The Hawk’s parsimonious warfare state releases more resources to indulge the Wets spendthrift welfare state. This was obvious whilst the ALP was in power, where cuts to defence funded higher welfare spending.

    Australia’s support for the US in Iraq is in that reciprocal martial tradition. Basically military alliances are favour banks – there aint no such thing as a free lunch.

    This is not just notional military benefit, it has paid dividends in recent military conflicts. Strong and close support from the Pentagon was critical in delivering the East Timorese from national genocide and re-establishing the regional credibility of the ADF. Without US military assistance we would not have been able to pull the INTERFET operation off.

    If the TNI had re-taken ETIMOR and INDON had been taken over by sectarian militarists we would be facing pretty massive human and fiscal costs. So it is plausible to argue that this example of the AUS-US military alliance has generated human and security benefits worth the $1 billion cost of ADF’s participation in Iraq.

    It is likely that Iraq-attack helped us obtain greater access to useful military assets since the Pentagon has agreed to place new US bases in our Northern military area. These assets are likely to return some military benefit to AUS, especially given the increased insecurity in our region: failed states, possibility of resurgent TNI, terrorist cells etc.

    Of course those benefits should also be set against the pssible costs caused by the disempowerment of the UN and disgruntlement of Muslims.

    Chronic critics of Howard pointedly ignore actual security benefits whilst obsessing abut potential security costs eg terrorist blowback (some of which are attributable to their own failed cultural policies). If consequentialists (and I am one of them) want to be taken seriously they have to take the ideological blinkers off and measure the costs and benefits of both factual and counter-factual policies.

  2. ET, Iraq and Afghanistan. All, none or just some and why? That is still the question. The logical default positions are all or none, when you think hard about all possible benefits and consequences. Easy to support ET now with the benefit of 20/20 hindsight, but we know that was certainly not an easy choice for Labor(us) in the past. Labor faces the harder road now, ditching logical defaults with its support for Afghanistan, but not Iraq, albeit having a convenient memory about ET from the past. Having a bob each way again, which suits few electors I would have thought(assuming here voters are the best adjudicators of consequences and benefits of all these conflicts)

  3. Jack, you keep making these claims about East Timor, but I was reading the papers at the time, and I don’t buy them. The Americans were very reluctant to give us any support, and what they did give us was very slow in coming. The fact that retrospective claims to the contrary are made is unsurprising, but if you read the paper you cite you’ll see how weak it was.

    The crucial period for the success or failure of the operation was the first few days, which determined whether the Indonesians and their militias would fight or flee. This was in September1999.

    Your source suggests, on the contrary, that the crucial factor was a US ship visit the following month. This is totally implausible.

  4. Is what you are saying that actions should be evaluated using benefit-cost calculations not necessarily measured in a pure money metric? If so won’t all but anti-utilitarians and perhaps those with distributional concerns agree with you? Jack is then only querying your assessment of benefits.

    Ethical considerations might be evoked as independent guidelines if it is difficult to quantify benefits. I assume you are not trying to dispense with morality. The issue of who should be making the judgement is partly a moral issue but once you have pinned that down you can certainly evaluate their stated position using benefit-cost approaches.

    I agree that when applying benefit-cost analysis to war that (more than usually) policy-makers need be aware of unintended indirect costs (and also, as Jack points out, of indirect benefits). Of course ex post wisdom is unhelpful in picking up indirect omitted costs and benefits.

  5. I know it’s not directly on-topic, but I feel impelled by the side-thread about East Timor and the US to say something about the false history being laid down about this episode.

    The appeasement narrative is a favorite of warmongers everywhere, but actually has some validity here. Neville Chamberlain and the Munich agreement are invariably cited in support of pre-emptive foreign military adventures, although it is usually forgotten that it was Neville who actually drew the line in the sand (Poland) and finally declared war. And the biggest supporters of appeasement were the Tory press of the time. As with Neville, so with John Winston.

    The best analogy for appeasement policy in recent history has been the bipartisan Australian policy toward accommodating Indonesian territorial expansion. This policy still holds for West Papua, it hardly needs to be said. Right up until Sept ’99 JWH was a zealot for this policy, and remains so for any centrifugal tendencies in the archipelago. What forced the intervention was Australian public opinion in response to graphic media images that harkened back to the Rwanda catastrophe. JQ is also entirely correct about the belated and reluctant US support for the venture, which consisted (from memory) of a logistic support ship that arrived some weeks after the event.

    The ‘insurance policy’ theory advanced by Jack in support of unquestioning Australian support for US military adventurism is thus questionable. If my car insurer behaved like the US has, I’d be looking for a new insurer. The first and only claim on the policy was met parsimoniously, minimally, and with great reluctance.

  6. Hal,
    You may look for other insurers, but where would you find them? Apart from regimes that (IMHO) are morally worse than the US there are no other sizable military forces on this planet. The US also has about the only real force with global reach. They therefore have pretty much a monopoly on insurance of this sort.
    In addition, Australia’s ‘agreement’ on territorial expansion by Indonesia, if it existed, cannot be equated to appeasement. At no stage was Australia realistically threatened by Indonesia (thanks to the US as the ultimate backstop). When Indonesia invaded E Timor the only realistic threat was that E Timor would be taken over by Fretlin – at that stage a party funded by China, who were a much bigger threat to us than Indonesia would ever be. Appeasement involved handing over the territory of a sovereign state purely to buy peace (or time, according to some of the other arguments above). Australia saw the E Timor thing as continuing the de-colonisation process (it was a colony at the time) and rectifying an historical anomaly.

    If you accept Indonesia should be a single nation, there is no difference between East and West Timor other than who colonised them.

  7. jquiggin Says: July 22nd, 2005 at 6:34 am

    I was reading the papers at the time,…
    The crucial period for the success or failure of the operation was the first few days, which determined whether the Indonesians and their militias would fight or flee. This was in September1999.

    Your source suggests, on the contrary, that the crucial factor was a US ship visit the following month. This is totally implausible.

    No. It is unwise for Pr Q trust what one “reads in the papers at the time” since they only give the front stage part of the story.

    The crucial fact that swung Howard into committing the ADF to INTERFET was the reasonable prospect of US military support should the sh*t hit the fan. The ADF was much more worried about the division of TNI regulars over the WTIMOR border than a few militias running amok in ETIMOR.

    Howard did have to twist alot of arms and jump a few links in the chain of command to get the amphibious assault carrier (not a “logistic support ship”) off-shore, but a carrier he got. I suspect that Howard’s markers were laid down at that point and were called in for Iraq-attack.

    This US support was guaranteed in mid-September, only a couple of weeks into the crisis and before INTERFET had landed, although the carrier did not arrive until the first week of October. The presence of a USMC carrier in a theatre of operations normally means “game over” for hostile regulars. It is “totally plausible” that potential hostiles, such as the TNI, were deterred by this prospect.

    In addition, the US made available heavy-lift helicopters that were indispensable for INTERFET logistics, allowing the ADF to pile in equipment to handle the immediate crisis and keep main forces in the field for extended tours.

    One should also remember that the TNI strategy, which was then in the hands of rogue elements, was to re-take or sabotage ETIMOR as a prelude to a coup in INDON. So the battle for ETIMOR autonomy was also, in a sense, the battle for INDON democracy. And this was sheperded through at the crucial moments by Howard/Rubin-Cohen.

    The point of this digression is to counter Pr Q’s rather one dimensional approach to calculating the opportunity costs of military action. One should bear in mind that support for “dodgy” military venture (like IRAQ) could still be beneficial to the national interest if credited to subsequent “worthy” military ventures (like ETIMOR), or vice-versa.

    In short, there are longtitudinal and indirect costs and benefits which have to be accounted for when making the decision to commit troops to battle.

  8. Continuing on the off topic East Timor, don’t know why Clinton said no first off to East Timor. That was Clinton at the end of his Presidency. Do know that despite the SMH article and JQ’s and HAL’s recollections that the US role in East Timor was critical.

    For some reason the US was reluctant to be prominent in the INTERFET exercise. The ship in question the USS Belleau Wood (Tarara class LHA, a big boat) carries 12 Sea Knights and 9 Super Stallions, which were important to the logistical support. The US shifted the nations involved into East Timor including Australia. The reason the South Koreans were a week late was because one of the US’s big transport planes was temporarily out of commission. I knew of their very high level of logistical support from personnel involved in the Defence operations.

    An example of the breadth of the US involvement, the Army’s 11th Signal Brigade. The brigade’s mission was to establish a network that could serve multinational peacekeepers until Australian forces could establish a longer-term system. The U.S. forces began their work with a C-5 transport aircraft deploying 48 hours after receiving the deployment order, and remained for 60 days until Australia commercialised the network.

    Those I knew did not know why the US was playing such a discrete but key role, as put in Signal (AFCEA)
    “An unusual aspect of this coalition operation was that it featured U.S. forces in a key role, but not as the lead force, in the multinational operation. That duty fell to Australia, which led the peacekeepers seeking to restore order following violence that erupted after pro-secession voting�

    They did speculate however. Pushing Australia to play a front role (not that peculiar, I noted that the EU Barcelona Report saw Australia as the nation to do the “lifting and controlling� in SE Asia in their grand plans for military and humanitarian units to cover the world). Thus the US is never “involved� unless it is in charge. That it was the UN involvement and that made it a no go. If true interesting as this was the Clinton era not Bush.

    On the topic of Iraq, a just war or otherwise and whether the costs exceed the benefits and who should have known what when. I have found this rather disappointing. I am of the mind to agree with Razor “load of academic codswollop. If it was based on evidence of what factors were considered when a decision to go to war was made, then I would take notice.� And Anon “if your criteria are to be useful as a decision-making tool, they have to eliminate unjust wars and allow just wars, using only the information available at the time the decision to go to war is made�

    There are the endless references to Vietnam as if it had any common factors with Iraq other than the USA. The Iraq War is treated as a closed bounded event, which has essentially reached end point. Heard Prince Hussain? of Jordan on the BBC. He has been quoted re Iraq and civil war. He said more than this, which wasn’t reported by the ABC. That the civil war in Iraq is the civil war in the ME, not caused by the invasion of Iraq rather being fought in Iraq because of the invasion. That there was an inevitability of civil war in the ME that wasn’t being addressed and it will more than likely expand. Even potentially between Azerbaijan and Iran (rights of non-Persians, absorption of Azerbaijan into Iran, Caspian oil) If he is right this is not just about the Coalition invasion it is a different beast that has been lurking and the cost and benefit analysis becomes an even more complex calculation. Nothing like the simplistic approach discussed here. I heard also in a report on the money side of the terror business that the major source of funds for the Iraq “insurgency� is still Saudi Arabia. This would I suggest lend support to the Prince’s proposal of the ME civil war being fought.

    Then the factors considered including the motives and decision making approach of the Coalition, and the sneer “interest in the welfare of the American public�. There is always the argument that it is necessary to understand why criminal thugs like Zaqarwi expanded his criminal beginnings to being one of the great butchers of my life time, without any real consideration that there may be some mitigating aspects to how Bush thinks believes and decides on the other hand. I would throw in Barnett and his apparent influence with the Pentagon re the role of the USA as the supplier of security in the world, and the need to address the gap as just one factor adding complexity. It has to figure in some way in the calculations of the costs and benefits and in the outcomes that the Coalition is looking for.

    But no, same old same old.

  9. OK JQ – if you think that the direct support was too late to be a significant impact – lets take it down to a lower level. The troops deployed with third generation night vision equipment. The image intesification tube that is in that equipment was only released to Australia because of our trusted status as an Ally. This technology and the high availability of it means that our soldiers can dominate the battlefield at night. Previous generation II was neither as effective or freely available. The same applies to the encrypted radios used for communications and GPS. Those three items together are war winners – GPS, comms encryption and Night Vision are the best things since canned piss. As Russel Crowe says – God bless America, God Save the Queen, God Defend New Zealand and thank God for Australia. (I’m an Aethiest, by the way!)

    And what Jack Strocci said about the Aussies shitting it about the TNI across the border – absolutely spot on, and the Armoured vehicles up on the border had enough main armament ammo for maybe two serious stoushes – after that it was mag off, pack off and fuck off.

  10. So Razor, to be clear, if the ET operation had taken place in, say, 1995, before these goodies, we would have lost?

    Or are you just saying that these things are nice to have when the other side doesn’t?

  11. We may not have lost, but the victory probably would have been slower and more costly.

  12. Some would argue that we would have lost. we would have been overwhelmed by the numbers. It simply would have resulted in the slaughter of Aussies. Which made the demands by the left before Interfet stupid and conspicous compassion with the cost being met by others

  13. All this seems a remarkably gloomy assessment, given that, as I pointed out above, the potential opponents had all either gone home (TNI), run away or stopped fighting (the militias) long before the Americans showed up, and except for a relatively small number of cross-border raids, they never put up any resistance at all.

    The fact is that if the Indonesian government hadn’t agreed to pull the army out, the mission would never have taken place. If ‘rogue’ elements in the army had attacked the Interfet forces, the action would have been over, one way or another, long before the Americans arrived.

    Again, I observe, this whole thing is a fantasy and everyone who was paying attention at the time knows it. Australia did most of the heavy lifting on ET, and the US was well down the list of those who helped, both in terms of enthusiasm and actual contribution.

    Given that in saying this, I’m praising the Howard government (which I generally disagree with) and criticising the Clinton Administration (which I generally supported, at least on foreign policy issues), I don’t think I’m being misled by partisan feeling on the issue.

  14. All I can say JQ is that those working in operations here in Australia were clearly fantasing and further more they weren’t paying attention. Very worrying that they had no idea what was going on. Fortunate it is that others did, and knew that the US was just passing by.

  15. Ros, I point out again that the Belleau Wood did not arrive in East Timor until well after the risk of trouble was over. Logistical support is all very well, but the US was only one of many countries that contributed such support. The UK, France and NZ all provided transport/escort vessels for Interfet.

    The idea that we got extra support for ET because we are a faithful ally of the US doesn’t stand up to an examination of the historical record.

    Unless you have some other information, I remain unconvinced (along with Howard & Thawley, unless Hartcher’s SMH piece is pure invention).

  16. John I did not bring up the Belleau Wood as proof of the US involvement. All I know is at the time I was married to and socialised with defence personnel who were involved in the Interfet and I have very clear memories which I have confirmed that there was strong and very important USA logistical support. I was told at the time that we could not have done it without that considerable support. It has not been said so I will assume it is not understood also that the Japanese were paying a lot of the bills.
    As I said earlier there was discussion of and theories as to why it was important to the US to be very low on the radar. One of the suggestions was that Clinton was a lame duck President at the time. Maybe it was to some extent under his radar also. I am not arguing that we got that support because we were a faithful ally of the US. Merely that for whatever reasons that is how it was. If you consider that I am dreaming or inventing or too silly to know there is nothing I can say.

    As to Hartcher, we are reading quite different meaning into that SMH article, as I consider that the following gels with what I believed at the time and now.

    “he was initially rebuffed by the Clinton administration�
    “We of course got good US support … but we do not have votes, and that means we have to sell ourselves to the administration and Congress�

    “that hiccup we had in early September in 1999.”

    This article is not about the support of the US in ET. It is about the nature and form of our relation ship then and now.

  17. “I am not arguing that we got that support because we were a faithful ally of the US.”

    But that is the proposition I was arguing against, made by Jack S first up. Here’s what he said.

    “Australia’s support for the US in Iraq is in that reciprocal martial tradition. Basically military alliances are favour banks – there aint no such thing as a free lunch.

    This is not just notional military benefit, it has paid dividends in recent military conflicts. Strong and close support from the Pentagon was critical in delivering the East Timorese from national genocide and re-establishing the regional credibility of the ADF. Without US military assistance we would not have been able to pull the INTERFET operation off.”

    Not that the assistance was helpful, but that it was essential and only forthcoming because we were such a faithful ally.

  18. http://badanalysis.com/catallaxy/?p=1035 No oil, too many quagmires and consequences and none of our oppressive neo-colonial business really. Obviously Mugabe’s neighbours need to push his disaffected and disgruntled back across the borders to sort themselves out in their own way and own good time, a la Rwanda and Darfur. Besides the waiting lists for elective surgery in our public hospitals are far too long, let alone the underfunding of our tertiary education sector. Simple really when you think about these things logically.

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