Sunday, January 16, 2011

Predicting the costs of the Civil War

The Disunion Blog on the NYTimes website, a personal obsession of mine these past several months, included an interesting gem in a recent piece entitled "Declining War, Rejecting Piece." The setting was early 1861, when an uneasy standoff prevailed prior to the assault on Fort Sumter. Quoted in the blog article is a statement by the "Fire-Eater" secessionist Edmund Ruffin in the Richmond Index the week of 1/12/1861 to 1/18/1861, a Saturday to a Friday. He was referring to the costs to the Union of a civil war:

"They could not win such a contest without the sacrifice of fifty thousand lives and one hundred million dollars."

As I recounted in a recent working paper, the actual cost of the Civil War for the North turned out to be 364,511 killed, or more than 7 times as many as Ruffin's guess. The North spent $2.3 billion in current dollars on direct military expenditures, or 23 times more than Ruffin imagined. The benefits that the U.S. would eventually extend to Northern veterans would eventually double that figure in terms of present value.

Ruffin's was only one cost forecast, but he had an incentive to exaggerate it. It would appear this is another example of systematic underestimation of the costs of war (Nordhaus, 2002).