Frederick W. Kagan has an article in National Review Online that attempts to refute some of the antiwar arguments about Iraq. I haven’t read the whole thing—It’s a huge piece that covers a lot of ground, and some of it may even be correct—but there’s a pretty glaring example of the broken-windows fallacy in the first section:
The “$3 trillion war.” Simplistic economic analysis declares that the war has cost the taxpayers $3 trillion since its inception, implying that this is a $3 trillion dead loss to the economy—a price too high to pay.
Modern economics has long understood that the notion of a one-for-one guns-versus-butter trade-off is simply wrong. A high proportion of money spent on defense goes back into the U.S. economy in the form of salaries paid to the more than 5 million Americans employed directly or indirectly by the Defense Department, and payments to the defense industry and the long and complex supply chains from which they draw their raw materials.
This might sound sensible—or even sophisticated and worldly—but it’s nonsense, and it’s been nonsense at least since Frédéric Bastiat pointed it out in 1850.
Of course the money spent on defense goes back into the U.S. economy—most of it is spent on salaries and merchandise bought here—but we never get back the labor purchased with those salaries, and we never get back materials expended in the war.
The cost of the war (or anything) is the lost opportunity to use the expended resources for something else. If you pay a man to drive a truck for the army in Iraq, then both he and the truck are unavailable to private industry here at home. War is costly because it uses up people and things that could be used for something else.
It’s a separate argument whether the war is worth the cost, but it’s foolish to try to deny the cost in this way.
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