Economists describe opportunity cost as every dollar that we cannot spend on other priorities whether at home or abroad, in relation to the Iraq war. Government so far has spent billions of dollars on this war, but this budget whether a portion or all could have been directed on other projects needed for our future advancement and investment. As the War begins to dwindle down and the dollar considered being scarce in this state of the economy, the questions remain as to where we are going to use it (Center for American Progress, 2004). In a layman’s language, opportunity cost is the cost that is usually forgone in favor of the already chosen ones. Many theorists and economist believe that the money that the United States channels to war could have been used in other sectors. Economically, the war has been thought to cause more harm than benefits (Dancs, 2006).
There have been interests that economists have highlighted and have desired to establish as the alternatives that the United States is foregoing through spending money resources, effort and human life in Iraq instead of spending all these resources on other things that would be considered better off than the cost of the war. A close analysis of the input that has been made and the results of the investment leave a lot to be desired to some people. Firstly, looking at the human cost which is considered the most important of all costs, thousands of soldiers died and other tens of thousands wounded. About 20% of the soldiers who return from the war were reportedly suffering from post-traumatic stress (Center for American Progress, 2004). This also takes place with hundreds of Iraqi people dying and several millions either becoming displaced or refugees in other nations.
The loss of the United States’ soldiers translates to some monetary loss in future. This is basically in terms of productivity. In real costs, the United States committed $456 Billion on the war in Iraq. This money is considered to be a huge sum of money and could have been used in favor of such activities like funding the Kyoto Protocol to control greenhouse gases whose budget was about $300 Billion. Other areas where the money could be allocated should have been towards 48.6 million children with health cover and care for the duration of time of the war in Iraq. The United States could have generated 15% its supply of electricity in renewable resources like solar and wind. This could even have cost less money than that. The money could as well been used to build several millions of affordable housing units (Center for American Progress, 2004). A good number of the dwelling units in America could also have been provided with a 2.5 kW photo-voltaic system or may be the funds could have been used to build tens of thousands of elementary schools.
However, the dollar that has been spent on the Iraq war cannot be spent in handling other priorities whether internationally or at home. This is what economists refer to as opportunity cost. All these dollars could have been channeled to other needs and be used to make investments to benefit the country in the future (Aubuchon, 2008). Actually, that amount of money may have offered four-year scholarships as tuition fees to any public university for the seniors who were graduating. Other projects could have been used to fund the Coast Guard that was needed for port security. The money could have also been used to reduce the budget deficit by a good fraction (Center for American Progress, 2004).
After the period of war in Iraq, some people still think that a lot has taken place in the United States that speaks a lot to the country’s elected personalities concerning their priorities. At the same time, the number of people that did not have health insurance has grown high. Many people are under-insured and may not be said to have enough money for their heath care. All these costs were foregone in order to facilitate the chosen cost of war that was basically important as at that time. The rate of poverty is still about 10% most of which are children. The median income in household has either declined or stagnated. The employment rate has not reached a satisfactory level as income inequality has increased greatly. At the same time, divestment in the infrastructure and the families by the Hurricane Katrina has still continued to bother the country and the people of America. The Hurricane greatly exposed the poverty that is present in the nation of wealth. It also exposed the neglect on the country’s infrastructure (Center for American Progress, 2004).
This cost on the Iraq war presented a very big challenge on determining the efficacy of opportunity cost in decision making. The difficulties realized in the application of opportunity cost as an aid of making decision are rarely discussed in the related texts of management accounting. However, the emerging management texts commit at least some coverage that mainly involves the calculation of pertinent benefits and cost for the decision making process (Center for American Progress, 2004). The main definition discussed by most of the economists revolves around the contribution or gain that is rejected by making use of the limited resources for specific purposes (Regan, 2002).
Opportunity cost remains to be at the very center of making decision in the contemporary society. The Iraq war was a very decisive moment for the United States. Opportunity cost was very useful in evaluating the options that were available. It is very useful in calculating the merit of the competing alternatives available as aforementioned particularly for this noble country, the United States. Opportunity cost comes in as a method of described the alternatives that are preferred (Mendershausen, 1940). Despite the many wants in healthcare, energy, port security and education among other needs, the cost on Iraq war could not be substituted for these other needs. Preference was made on war and all other costs forgone in its favor.
The decisions to be made are concerned with the choice of alternatives. Ultimately, any procedure of establishing revenues and costs for decisions which endeavor to handle opportunities in isolation is not likely to offer a complete analysis. The main significance of the concept of opportunity cost is that it mandates the decision maker to consider all alternatives. All these alternatives that would seem prudent for the United States had a chance for such a budgetary cost and allocation. However, opportunity cost goes for the most appropriate alternative based on the hierarchy of needs for the decision maker. War has detrimental effects in short term but if successively won, then it produces long term benefits. Therefore, the application of opportunity cost is also characterized with risk taking. It was a high risk for the United States to engage in the war at the expense of other needs. However, opportunity cost takes a center role in determining the way to go in such challenges. The right alternative for opportunity cost apparently may not be fair but it is beneficial in the long run (Aubuchon, 2008).
The decision making process that involves opportunity cost has very crucial information implications in the need of the decision maker to be aware of the options that are available as well as the consequences that accompany them. This does not only take place within the area of responsibility. The case of the Iraqi war squarely fits in this category that is outside the responsibility of the United States. Making an assumption that this would be possible, Opportunity cost highlights the need for a comparison of all the other alternatives. It is however very hard to imagine that any logical approach to the process of making decision that does not focus every close substitute as being a possibility (Regan, 2002).
The use of opportunity cost is completely justified on the idea that a lot of alternatives will be forgone outright without conducting a formal analysis. The United States indeed was in a precarious situation and the decision was tough to make because Iraq was posing a threat to the security of Americans while America was suffering from some economic challenges that would require budgetary allocations to favor a number of sectors and areas of concern. However, even though opportunity cost is in most cases could offer a short cut in implementing calculations, there is a corresponding danger if the entire problem is not taken into consideration. Opportunity cost was thus a key determining factor in making the decision on Iraq war.