"The Economics of Roadside Bombs"
The U.S. military has been criticized for its failure to stop the Iraqi insurgency's use of improvised explosive devices (IEDs), which have caused most of the Coalition casualties. We use instrumental variables to estimate a microeconomic model of insurgent responses to U.S. military countermeasures. We find that insurgents increase the number of IED attacks when IEDs are made less effective, but that the insurgents' overall capacity to inflict damage decreases. These results suggest that a major benefit of IED countermeasures comes in reducing non-IED attacks, which decrease 2% with every 1% decrease in IED effectiveness. Previous evaluations of the U.S. military's $13 billion counter-IED effort have therefore significantly understated its success.