Stiglitz concluded that even the most pessimistic of government estimates were hugely under the mark, and he estimated the total economic costs of the war by his model at between $1-2 trillion dollars.
Stiglitz began his lecture by rebutting a common criticism to his economic critique of the war-the argument that "We don't go to war based on our accounts." He said that while such an argument may have applied for earlier wars, Iraq is a different situation because "This was, in the fundamental sense, a war of choice. We could have chosen to go to war or not to go to war, or chosen the timing of when to go."
In addition, Stiglitz refuted the notion that it was unusual to use cost-benefit analysis to examine a war, saying that the Department of Defense has used the same method to judge many previous actions. He then discussed the original estimates by the Department of Defense on the costs of the war, which at their most pessimistic reached $100 billion.
Stiglitz claimed that these numbers were artificially deflated largely because they were reached by cutting soldiers' benefits and failing to take into account benefits that would need to be paid to veterans' over the long term.
Stiglitz first calculated war costs that appeared on the actual budget, many of which came from veterans' benefits, especially lifetime benefits to soldiers who received brain or spinal injuries during combat. He also accounted for additional defense spending such as increased costs of recruitment and costs for replacing equipment.
Stiglitz's estimate also included the staggering costs of paying interest on money borrowed in order to fund the war, bringing the price range from $750 billion to $1.2 trillion for these items. In addition, he factored in what he called the true social costs of the war-"the difference between the budgetary costs and the actual economic costs," according to Stiglitz.
He pointed out that many reservists would otherwise be doing jobs that had greater economic value, and also took into account the adverse effect on our first response capabilities from having many National Guard troops abroad, estimating the social costs of the war at $200-300 billion.
Examining the macro-economic costs which affect the world economy, Stiglitz argued that a great deal of these costs came from the inflated price of oil. "The only people that have really benefited from the war is the oil companies, and they have benefited enormously from the increased price of oil," he said.
Stiglitz said the war was preventing companies from investing in Middle East oil and forcing them to rely on more expensive sources, which runs contrary to earlier speculation that the war would lead to cheaper oil prices.
Stiglitz concluded the lecture by talking about the opportunity costs of the war. He argued that the investment of war money in infrastructure and other goods that would pay off in the long run would have left the country in much better shape. "We could have had a stronger economy and a more secure country if the money had been spent in a different way," he concluded.
Following his lecture, Stiglitz fielded questions from the audience and spoke one-on-one with interested students even after the formal program concluded.
Students and faculty generally said that they were impressed by Stiglitz's clarity and persuasiveness. "I'm not really a liberal person, but I agree with nearly everything he said, and I think that says something," said Tadeusz Pudlik '09. "His lecture was educational and valuable."
James Montana '08, though impressed by Stiglitz, did not find his case persuasive. "Stiglitz's lecture was highly informative, albeit generously larded with cheap shots," he said. "Unfortunately, I don't think anyone changed position on the war as a result of the lecture. Those who thought the war was a mistake were reinforced in their opinions, and those who, like myself, continue to support the war appreciated particularly Stiglitz's admission that economists know 'the price of everything and the value of nothing.'"
Associate Dean of the Faculty Frederick Griffiths called the conclusions that Stiglitz reached "devastating." "Professor Stiglitz is a master in making complex topics accessible to a general audience," he said. Given the long-term implications of the impacts that he was modeling, one might perhaps have wished that he were less clear."