LOS ANGELES — How much will the worst terrorist attack in history cost America? The answer, according to an article in the last issue of The Milken Institute Review, is hundreds of billions of dollars — and possible trillions.
That price tag comes from Peter Navarro, an economist at the Graduate School of Management at the University of California, Irvine, who includes not only the tangible costs of the attack, but intangible ones, too, including the value of the lives lost in the World Trade Center and the Pentagon, as well as the fears of those who worry they will be the next victims.
But the key point in his cover story, "Assessing the Costs of Terrorism," is that the most important decisions that will affect the final bill have yet to be made.
"The most critical choices will be the ones that affect the economy as a whole — in particular, government fiscal and monetary policy, and potential instability in world energy markets," Navarro writes. "For while a proper accounting of the short run costs of the attack yield mind-numbingly large figures, the damage promulgated through inflation, unemployment and lower productivity could dwarf the numbers linked to loss of property and life."
Also in this issue of the quarterly economic journal, Ross DeVol, Director of Regional Studies at the Milken Institute, counters the fashionable pessimism infecting the long-term outlook on technology and growth. Betting against the technology-enabled New Economy in 2001, he says, is similar to dumping auto stocks in 1908 because it was a bad year for car sales.
"Don′t give up on The New Economy or the Internet because of the dot-com flameouts," writes DeVol. "Future productivity gains from the Internet and linking of computers will justify share prices above today′s valuations."
The 4th Quarter Review also includes:
o Tim Taylor, managing editor of the Journal of Economic Perspectives, favors individual retirement accounts for Society Security recipients — but with a twist. Private accounts, he says, should be the liberal quid pro quo for raising Social Security taxes to preserve the system′s long-term solvency.
o Victoria Marklew, senior international economist at Northern Trust, analyzes Prime Minister Junichiro Koizumi′s chances for pulling Japan out of its long economic slump.
o Robert Walker of the University of Nottingham and Michael Wiseman of George Washington University compare Britain′s ambitious efforts to reform welfare with America′s tough-love approach.
o David Evans of National Economic Research Associates examines at the success of "free" software such as the Linux operating system. He respects their accomplishments, but predicts that the heavy lifting in software will continue to be done by commercial producers.
o Rick Carey, a writer who covers cars and the auto industry, offers a cool look at the economics of car collecting. The bottom line, he says, is fun — not profit.
This issue′s book excerpt is from "Nickel and Dimed," the best-seller by Barbara Ehrenreich, which offers a first-hand look at how America′s unskilled workers try to survive on $7 an hour.
And, of course, we have our regular features: The Charticle (this time on the return of blacks to America′s South), a puzzle, and Mark Alan Stamaty′s cartoon, Ekinomix.
The Milken Institute Review is distributed to some 10,000 corporate and financial executives, policy makers, academics and journalists throughout the world. Its editor is Peter Passell, former economics columnist for the New York Times.