National security.

• Position: Bureau News - Security concerns

The NBER's Working Group on National Security, directed by NBER President Martin Feldstein of Harvard University, met in Cambridge on November 21. This Working Group deals with the wide range of issues that affect national security, with a primary focus on the security of the United States. Topics include: military strategy (defense budgets, technical changes, and manpower); sources of terrorist risks (causes of terrorism, financing of terrorism); homeland security policies for dealing with terrorism (nuclear, chemical, and biological); and problem areas (North Korea, Iraq, and so on). The group will meet at least once during the academic year as well as during the NBER's Summer Institute.

The following topics were discussed in November:

Steven J. Davis, Kevin M. Murphy, and Robert H. Topel, NBER and University of Chicago, "War in Iraq vs. Containment: Weighing the Consequences"

Justin Wolfers, NBER and Stanford University; Andrew Leigh, Harvard University; and Erie Zitzewitz, Stanford University, "What Do Financial Markets Think of War in Iraq?" (NBER Working Paper No. 9587)

M. Ishaq Nadiri, NBER and New York University, "Lessons from Afghanistan: An Economist's Perspective"

Christopher Foote, Federal Reserve Bank of Boston, and recently U.S. Treasury at Central Command in Baghdad, "The Current Economic Situation in Iraq"

Manuel Trajtenberg, NBER and Tel Aviv University, "Defense R&D Policy in the Anti-Terrorist Era" (NBER Working Paper No. 9725)

Matthew Weinzierl, Harvard University and Council of Economic Advisors, "The Cost of Controlling Nuclear Weapons and Materials"

Francesco Caselli, NBER and Harvard University, and Wilbur Coleman, Duke University, "On the Theory of Ethnic Conflicts"

Prior to the war in Iraq, the United States and its allies pursued a policy of containment authorized by the United Nations Security Council. Major elements of containment included trade sanctions, weapons inspections, no-fly zones, and a maritime interdiction force. Continued containment was the leading option to U.S.-led military intervention and forcible regime change. Davis, Murphy, and Topel provide an ex ante assessment of these broad policy options. Containment required a potent U.S. military presence in Southwest Asia. Before the pre-war Build-up, the United States devoted roughly 30,000 troops, 30 ships, 200 aircraft, and other military resources to containment efforts at a cost of $13 billion per year. Based on the requirements for effective containment and the likely duration of a hostile Iraqi regime, the authors place the present value cost of...