Baumol’s Cost Disease Strikes Insurgents

Spencer Ackerman has an enlightening report on the price of IEDs, the bottom line of which is that “[m]ost of those bombs have gotten cheaper to produce.” But there’s more to the bomb game than the bombers, and over the same period “the going rate on suicide bombers appears to have risen, from $5,966 in 2006 to nearly double that in 2009.”

World Development Indicators – Google Public Data ExplorerEdit descriptionwww.google.comStudents of economics will note that this is a pretty typical Baumol’s Cost Disease scenario. Over time, a committed insurgency gets better at making bombs, either through improved skills or improved supply chains, leading to higher costs. But suicide bombing is an inherently labor-intensive enterprise with essentially zero range for productivity growth. Consequently in a country like Iraq that’s experiencing very rapid GDP growth, you see skyrocketing costs. And in the suicide bombing case, the problem is particularly severe since the marginal worker dies on the job, leaving the would-be mastermind of the plot always needing to move up the value chain.

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