The Economic Perversity of War: Horizontal Inequality and Flawed Welfare Measures

James Boyce argues that economists studying war and peace must move beyond aggregate measures like national income or GDP and focus on the distribution of resources. He introduces the critical distinction between vertical and horizontal inequality, asserting that the latter is particularly salient in understanding and addressing violent conflicts. Horizontal inequality refers to disparities between groups defined by non-economic factors such as ethnicity, religion, language, or region, which often become bases for mobilization in conflict.

Boyce highlights a significant flaw in conventional economic approaches, particularly the provision of large-scale economic assistance. He contends that directing aid to only one side in a conflict, even if it leads to GDP growth or infrastructure development, will not foster durable peace. Instead, such selective assistance is likely to exacerbate existing tensions and prolong the conflict by empowering one faction over another without addressing underlying grievances.

A central critique is leveled against GDP as a measure of social welfare. Boyce points out the irony that GDP counts expenditures on arms as a positive contribution to economic growth, even when these arms are used for destruction and killing. This conventional accounting mechanism creates a perverse incentive, where conflict and rearmament appear beneficial for the economy, despite their devastating human cost.

The broader implication is that current economic metrics and policies often fail to align with the ultimate goal of human well-being. While certain individuals or groups may profit from conflict and arms expenditures, the overall welfare of society suffers. Boyce implicitly calls for a re-evaluation of economic tools and policies to prioritize genuine human welfare and peace-building over simplistic measures of economic growth that can mask or even encourage destructive activities.

among the tools that economists can use for the purpose of studying War and Peace are the analysis of distribution of who gets what

the idea treating society as if it were an undifferentiated mass as represented for example by national income or at the micro level by the net benefit of a given development project is of course an oversimplification that simply cannot be sustained when a critical issue is who gets what

horizontal inequality is inequality between groups that are defined on some basis other than the fact that they are rich or poor defined for example on the basis of the region on whether they are in urban as opposed to rural areas on the basis of ethnicity or language or religion

if one decides as an economic policy maker to provide large scale economic assistance to a government which represents one side in a conflict and excludes assistance to the other side in that conflict the chances are that assistance while it may succeed in growing the economic pie is measured by GD P it may succeed in building some miles of Roads or airports or whatever it won't succeed in actually building a durable peace

on the contrary it will exacerbate the conflict

one of the ironies of the conventional measures that economists use for assessing social welfare that is to say total GDP is that actually counts expenditures on arms as a benefit

your economy is bigger you've grown if you're spending moreone money on arms even if those arms are being used to kill people and in the process the arms are being destroyed

it doesn't mean it's good for people it doesn't mean it's good for the human beings it may be good for a few people who are profiting from this or using those resources to persecute their foes or Rivals but it's not good for human wellbeing as a whole

at the end of the day human welfare is what economics should be about