Cost benefit analysis of war

Among the many perspectives to analyze war, such as rational actor, organizational process, governmental politics and ethics, the perspective that actually incorporates the costs and benefits into a systematic theoretical structure has hardly been analyzed. The purpose of this paper is to analyze the costs and benefits perspective.

Three kinds of value are distinguished, i.e. human, economic and influence. Different actors (politicians, populations, stakeholders, etc). assign different weights to the three kinds of value. Six gradually more complicated models are developed. The first subtracts losses from gains for the three kinds of value. Thereafter, the paper accounts for multiple periods, time discounting, attitude towards risk, multiple stakeholders, subcategories for the three kinds of value, sequential decision-making and game theory.

The rich theoretical structure enables assessing costs and benefits more systematically and illuminatingly. The cost benefit analysis is illustrated with the 2003-2011 Iraq War. The paper estimates gained and lost value of human lives, economic value and influence value, and show how different weights impact the decision of whether to initiate war differently.

The paper provides scientists and policy makers with a theoretical structure within which to evaluate the costs and benefits of war, accounting for how different actors estimate weights, the future, risk and a variety of parameter values differently.