John Kerry is back in Israel, to push for progress on Israeli-Palestinian peace talks. The American government has revealed little about what Kerry has said, but if his past comments are any indication, he may discuss the importance of peace to the Palestinian economy. He’s less likely to talk about the importance of peace to the Israeli economy.

Israel’s G.D.P. per capita was more than thirty-three thousand dollars in 2011, and the country attracted more than ten billion dollars in foreign direct investment last year. The Bank of Israel is flush with reserves, almost eighty billion dollars, with which it can stabilize the shekel. Newly discovered gas fields are estimated to be worth billions of dollars. Last year, Israeli companies exported about sixty-two billion dollars’ worth of goods. And Israeli entrepreneurship is justly famous: in June, Google announced it had bought the Israeli mapping startup Waze, reportedly for a billion dollars.

No wonder CBS’s “60 Minutes” last year ran a swooning report about greater Tel Aviv, describing it as “Miami on the Med.” “The recession has passed Tel Aviv by,” the leftist Israeli journalist Gideon Levy told Bob Simon. It appears many on the Israeli left doubt that a continued occupation will lead to economic harm. During the summer of 2011, when hundreds of thousands took to the streets to protest social inequalities, organizers generally elided mention of the conflict. Palestinians, for their part, insist the occupation is boosting Israel’s companies at the expense of Palestinian ones.

The Israeli right seems even more convinced that the occupation hasn’t hurt the economy. In 1998, Prime Minister Benjamin Netanyahu told me in an interview for Fortune that Israel’s military research, along with immigration to the country by Russians, would lead inexorably to prosperity. “Peace would be a useful, additional condition,” he said, “but it is not the primordial, necessary condition, which is, anywhere, economic freedom.” Last year, Dan Senor, an American writer and political adviser who has promoted Israel as the “Start-Up Nation,” took Mitt Romney—his candidate (and Netanyahu’s)—on a pre-election trip to Jerusalem. Romney said Israel’s economic progress provided a “model for others throughout the world.”

The problem is that it is difficult to determine the opportunity cost of the conflict. How well might the Israeli economy have done if the conflict hadn’t taken place?

Now, Yusaku Horiuchi, my colleague in Dartmouth College’s government department, has applied a fascinating new method for deriving just this. Imagine, Horiuchi explained to me, that we could take a pool of countries similar to Israel in various respects—exports as a percentage of G.D.P., urban population, mortality rates, consumption, government expenditure as a percentage of G.D.P., and so on—and then use that pool—call it a “donor pool”— to create a “synthetic Israel” that we could track alongside the real one.

To do this, you could use known statistical methods to combine these countries’ economic records, so that the weighted average record of economic performance in the pool tracked with Israel’s record over, say, a generation.

True, crucial characteristics in other countries would not be like Israel’s. Other O.E.C.D. countries are bigger; they do not have ultra-Orthodox communities; they don’t have, per capita, as many edgy scientists—or drivers. But when you track the real Israel against synthetic Israel, their economies behave quite similarly, and that’s what matters to the analysis. This isn’t a completely new method of analysis: Horiuchi is applying to political economy an approach similar to what some asset-management companies apply to investing.

Now imagine a catalytic event that affected Israel but not synthetic Israel—an event with long-term ramifications, like an eruption of the violent conflict with the Palestinians. We could then compare Israel to synthetic Israel and see if any divergences in economic performance seem attributable to this event and its aftermath. If a demonstrable gap opens up, and is never closed, we would have a sense of the opportunity cost of the conflict’s exacerbation.

I could not resist. We experienced precisely such an event in the early aughts, the Al Aqsa intifada, which disrupted a long period of hopeful normalization and kicked off a decade of tension and periodic war. As it happens, this was precisely the decade in which the “Start-up Nation” was said to have come into its own. I suggested that we track Israel’s G.D.P. per capita from 1980 to 2000—which in spite of the 1982 Lebanon War, and the comparatively nonviolent intifada of 1988, was a relatively peaceful, even hopeful, time—and then build a synthetic Israel for the same period. Couldn’t we then determine what Israel’s G.D.P. per capita might have been, if that relative peace had continued during the decade that followed?

Imagine, in other words, that Ehud Barak and Yasir Arafat had come to terms at Camp David in 2000, rather than ending direct talks in frustration and mutual recrimination. How would Israel’s economy have looked in 2010? What have Israeli citizens been missing?

Horiuchi and a Dartmouth student, Asher Mayerson, ran this analysis. First, they built a synthetic Israel made up of real countries: 3.7 per cent Belgium, 22.9 per cent Finland, 38.3 per cent Greece, 9.6 per cent New Zealand, 11.2 per cent Singapore, and 14.3 per cent Turkey. From 1980 to 2000, the growth of per capita G.D.P. of synthetic Israel tracked with Israel’s almost exactly—from about fifteen thousand dollars per year (in 2005 dollars) to about twenty-three thousand dollars. Both were entered into a graph.

Then, in 2001, the first year after the outbreak of violence, comes a startling break in the lines on the graph. By 2004, the per capita G.D.P. for Israelis was $22,637, while the comparable figure for synthetic Israelis was $25,942. The gap then widened slightly and never closed. (The possibility that this deviation was the result of chance is under five per cent, Horiuchi shows.)

There could, of course, be other reasons for the divergence. Likud officials have insisted that Israel’s unimpressive growth rate in the aughts had to do not with the conflict but with the bursting of the dot-com bubble. But at least a couple of the countries that make up synthetic Israel—Finland and Singapore—had larger high-tech sectors than Israel’s in 2001, as measured by the countries’ high-tech exports as a percentage of total manufactured exports. Yet Finland and Singapore saw their G.D.P.s grow more between 2001 and 2008 than did Israel—and so, too, did synthetic Israel. The 2000 intifada, meanwhile, had such a profound impact on Israel that it would appear to have been the most significant reason for the gap between real Israel and synthetic Israel. Cumulatively, from 2001 to 2010, Israel’s per capita G.D.P. was $25,513 less than that of synthetic Israel’s.