The U.S. incursion into Venezuela is the latest in a series of global conflicts and wars that have marked the 2020s so far. Because of how common such embroilments have become, it’s increasingly critical for leaders to understand their long-term effects on society.

This week, we take a closer look at one area that suffers tremendously both during and in the aftermath of armed conflict: the economy.

Plus, what does it mean to be rational?

War, what is it good for?

While there are past studies that have looked at the impact of war on the economy, most have centered on a narrow number of wars, regions, or years.

Efraim Benmelech, a Kellogg professor of finance who studies the economics of conflict and national security, sought to widen the scope of this prior work. He and a colleague analyzed 135 wars in the post–World War II era, from 1946 to 2023, and found that they led to severe and persistent negative effects on the economy of all 115 countries entangled in those conflicts—whether they were on the winning or losing side.

On average, real GDP fell by about 13 percent, with no evidence of recovery even a decade after the onset of war. Household consumption declined by about 11 percent. Investment in the countries’ structures, technology, and other areas collapsed, dropping by nearly 14 percent. And there was a significant decline in exports (roughly 13 percent) and imports (roughly 7 percent).

In response to these and other fiscal pressures, most countries resorted to issuing more currency, which exacerbated economic stress.

“Wars have been financed mostly through money printing and inflation,” Benmelech says. “And as we all know, inflation has some very adverse consequences for households.”

Indeed, price levels rose by nearly 50 percent on average and remained elevated for years after the start of a war. This not only raised costs and interest rates for people in the country but also further depressed investment.

Collectively, the findings make clear that the economic toll of war extends beyond the immediate costs of battle, leaving deep and lasting scars on the broader economy. Even 10 years after the onset of war, Benmelech says, “everyone seems to be losing.”

Read more in Kellogg Insight.

Different roles, equal value

When you think of a rational person, what comes to mind?

“If I were to ask people for the definition of ‘rational,’ most might say … we’re rational when we are competent and think in a very logical, straightforward, analytical way,” says Tessa Charlesworth, an assistant professor of management and organizations at Kellogg.

But when Charlesworth and her colleague studied how people actually talk about rationality—based on word embeddings of a massive collection of internet text—they realized that this definition only tells part of the story. People in the real world associated “rational” not only with words like logical and analytical, but also with words like responsible and trustworthy—attributing much more emotion to the term than previously expected.

Because it’s such a fundamental trait, the concept of rationality is bound to arise in the workplace, as in when companies discuss their values or the kind of employees to hire. It’s crucial in those moments for leaders to recognize that being rational is about more than just cold hard facts, Charlesworth says.

“The two different definitions of rational have different roles to play in society, but we’re seeing that both can be valued, both are important,” Charlesworth says. “So it’s critical to think about how to ensure that we are framing ourselves, our roles, and our companies in both ways.”

Read more in Kellogg Insight.