The Hidden Costs of Populism vs. the Hidden Benefits of War

Tuesday, April 27th, 2010

Bryan Caplan presents a policy trade-offs conjecture:

1. In economic policy, people under-estimate trade-offs.  When contrarians point out the large hidden costs of “feel good” legislation — protectionism, price controls, Medicare, etc. — the public and politicians furrow their brows in skepticism.

2. In foreign policy, people over-estimate trade-offs.  When contrarians point out the large, blatant costs of war — massive loss of life and wealth — the public and politicians credulously invoke just-so stories about the large hidden benefits of bloodbaths.

For example, if someone points out that the minimum wage increases unemployment, most people roll their eyes in disbelief, or attack his intentions.   Where’s the absolute proof?

On the other hand, if someone claims that killing thousands of children in another country protected/will protect our own children from a similar fate, most people take the argument seriously, or nod in hard-headed agreement.

This double standard would be dangerous even if expert understanding of the hidden costs of economic policy and the hidden benefits of foreign policy were on equal footing.  But the heart of my conjecture is that they’re not: Economists know a lot about the hidden costs of populism; foreign policy experts know very little about the hidden benefits of war.

The disemployment effect of the minimum wage might be moderate or large, but it’s there.  When people point to the benefits on a war, on the other hand, there’s often real uncertainty about whether the benefits are positive or negative.  Will the war frighten our enemies — or provoke them?  Will pre-emptive action remove a rising threat — or inspire a new threat that otherwise wouldn’t have existed?

Example: Almost no one thought World War I would give birth to anything like Communism or Nazism, or that the “war to end wars” would soon pale before World War II.  And who foresaw that the first Iraq War would inspire a wave of anti-American terrorism — which would then inspire a second Iraq War?  In each case, people at the time imagined that they faced clear, stark trade-offs, when the only really clear fact was that they were going to spend a lot of resources in order to kill a lot of people.

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