Fortnightly logo

The Economic Welfare Cost of War: An Empirical Assessment

What would the world pay for peace? War carries heavy economic costs. In the months leading up to the war in Iraq, the stock market languished, unable to shake the negative economic effects of the pending conflict. When the war commenced with the full glory of the "shock and awe" campaign, U.S. and foreign markets surged under the expectation that the war would be won quickly and decisively. Unfortunately, the gains disappeared just as quickly as they had appeared when U.S. and British forces began to encounter what the news media described as "set-backs" in the war campaign.

Claremont McKenna College Professor Gregory D. Hess can confirm empirically what the markets seem to know intuitively: war is bad for the economy and economic welfare, especially when it is drawn out and bloody. In a recently published paper Professor Hess asks the intriguing question: what is peace worth? How much would people rationally pay to secure it? The value of peace is, of course, more than just the economic cost of war, but looking at these economic costs at least sets a lower bound for what the nations of the world might be willing to pay. In his Athenaeum lecture Professor Hess will explore this issue, and share some of his fascinating findings.

Professor Hess is currently the Russell S. Bock Professor of Public Economics and Taxation at Claremont McKenna College. Prior to coming to CMC he was the Danforth-Lewis Professor of Economics at Oberlin College, and he has also held permanent teaching appointments at Cambridge University and the University of Kansas. He has also served as a visiting scholar and academic consultant for the Federal Reserve Banks of Cleveland and Kansas City and the IMF, and as an economist for the Board of Governors of the Federal Reserve System.

Professor Hess is a prolific writer, and his articles have been published in numerous books and academic journals. His recent work includes "Is there Evidence of a Poverty-Conflict Trap?" (October 2002), "For Better or For Worse: State Level Marital Formation and Risk Sharing" (October 2002), and "Terrorism from Within: An Economic Model of Terrorism" (September 2002), as well as the paper from which his lecture topic is drawn.