Question from a reader:
I was wondering if you could comment on the fact that you’ll never see papers or courses in defense economics, but there’s no lack of academic interest in other areas of gov’t involvement such as healthcare, education, agriculture, finance, etc.?
1. It is possible that fifty years ago you would have not made this observation. RAND was a defense contractor, and I believe so were some lesser-known economics outfits. Dorfman, Samuelson and Solow, which was still a major textbook when I was in graduate school, is arguably motivated by military resource allocation problems. And of course Schelling’s Nobel relates to the defense problem posed by nuclear weapons.
2. Then you have the Vietnam War, and from then on anything defense-related has a negative stigma. Still, arguably a lot of work on principal-agent problems in contracting has applications for procurement.
3. In recent years, the most talked-about defense problem is terrorism. There has been a bit of work on economic connections to terrorism, including who becomes a terrorist. But there does not seem to be much for economists to say, apart from noting the obvious discrepancy between the cost of anti-terrorism measures and the actual incidence of terrorism.
4. Research follows money. If the Federal departments that oversee health care, education, and so on are handing out more grants than DOD for economic analysis, then there you are.
5. It may be more difficult to have credibility without domain experience. The fact that Jonathan Gruber and David Cutler are not health insurance executives or doctors did not keep Congress from turning Gruber loose to redesign health insurance or trying to implement Cutler’s ideas for telling doctors how to practice medicine. But on defense, Congress probably would rather defer to a general or an admiral than to an economist.
6. An economist in the field of defense may need to work with classified information to be useful. This could limit opportunities for publication.
7. My guess is that a the career path for a defense-focused economist is less likely to involve an academic position writing papers for the same journals as other economists. Instead, it is more likely to involve employment at a defense contractor or in government. Research is more likely to flow up through a hierarchy than out through economics journals. One’s reputation is more likely to depend on how one is received by bureaucratic superiors than by academic peers.
Eric Lofgren at AcquisitionTalk.com, call your office.
DoD has tons of economists, but many of them are part of the vast OIRA-mandated new rule CBA calculation “ritualized sanctification” machine. In other departments these folks are usually integrated into some bureau of regulatory affairs within the legal office.
Some other reasons:
1. Field Exhaustion: there just isn’t that much more to say about modern military-related issues the depths of which haven’t already been plumbed to the very bottom. The fundamental problems and incentive structures don’t change very much. One interesting problem is how negotiations occur and surplus gets distributed up and down a very narrow supply-chain with few or no competitors at any level, but again, that’s an old, thoroughly analyzed problem.
2. No private players / markets. In healthcare and education, there are at least some private-ish markets with some semblance of ordinary supply, demand, and price mechanism, and thus there is some data out there regarding elasticities and response functions and so on, that makes policy analysis tractable enough to be presented in a sufficiently respectable and impressive fashion. For example, if we allow tuition to become tax deductible, or offer tax-exempt tuition bonds or education savings accounts, what effect will that have on enrollments and graduations, etc.
But there are no private purchasers of fighter jets or heavy tanks, and there is no mass consumer demand or behavior to study. Also, these days, that means that the character of political support or resistance to any military reforms touching the big money movements is very different, being much more of an “inside the sector” matter of lobbying and not a matter of media whipping up public sentiments one way or the other.
Which is kind of what the media is for these days, and so, if there’s no agitprop angle, it doesn’t get coverage. If it doesn’t get coverage, it’s not prestigious, and if it’s not prestigious, few people care about writing or publishing about it.
3. Military economic problems are often, at root, entrenched political problems without good answers in anything resembling our system of governance. Those political problems have also been pretty thoroughly explored. Most of the fixes are of the “you can’t get there from here” variety.
On the terrorism front, I would have to say that Hernando de Soto Polar did much more than look at the cost of terrorism prevention relative to terrorism costs. His highly influential and popular book The Other Path: The Economic Answer to Terrorism analysed the informal sector and underground economy of Peru in the 1980s. It demonstrated how an intransigent and overreaching regulatory state led to terrorism and offered a reform path that was instrumental in reforming Peru and undermining the Shining Path. He deserves far more attention and acclaim than he has gotten so far. As we watch France burn, his continuing relevance will need to be acknowledged now and in the future as the enviro-authoritarians work to extinguish prosperity for working people.
The questioner may have in mind solely the economics of the defence industry. More generally there is the theoretical literature on conflict and appropriation (Hirshleifer etc). Recentish overview:
https://www.socsci.uci.edu/~sskaperd/GarfinkelskaperdasHB0306.pdf
I remember reading one of Hirshleifer’s conflict papers as a grad student (not sure why, certainly wasn’t for a class) and wondering why it wasn’t more famous. Seemed foundational stuff to me.
I think this is a start to a field which really needs development:
Unconventional Economics: Operational Economics in Unconventional Warfare by Major Riley J. Post and Colonel (Ret.) Jeffrey D. Peterson, Ph.D.
http://jsou.libguides.com/ld.php?content_id=21562191
Good posts here. My own, somewhat more cynical thoughts:
Quite a lot of economics involves studies of the effects of policies and responses. Imagine one is say a state legislator in Missouri. Should state law specify a particular minimum wage for hotel workers? Would this increase or decrease employment by hotels? Would an increase in wages reduce hotel occupancy and lead to increased AirBNB rentals? Maybe $9 per hour for housecleaners is no big deal for the Statler Hilton in Kansas City; what’s the effect on a 12-unit motel in West Mousetrap (pop 378) up in the northern part of the state, where tourists never go? What do the economists say? What can we infer from their papers?
Which sort of suggests that data can be found to show how employment in the hotel business is affected by wages, or at least that data is available to support reasonable guesses about wages and employment. It also implies that reasonably sensible, well meaning, intelligent individuals can contemplate possible courses of action, discuss their merits, make a choice, possibly alter course with experience. Maybe West Mousetrap’s motel can keep paying $7.50 per hour, or even drop to $4.50!
We don’t have this kind of data for a lot of military-related issues. We don’t have a lot of control over possible choices of action. And it’s very hard to separate issues of effectiveness, which economists might be expected to agree upon, from issues of morality and politics, in which finding general agreement is almost impossible.
What’s a good figure to spend on maintaining ICBMs each year to keep the Red Army from overrunning Europe? We want to keep China away from Japan. Should we increase our ICBM force or just move another bomber wing to Osaka? Should we add some more to protect South Korea from the North? Do we debate this in academic journals, or the US Senate? Or in closed House sessions, augmented now and then by the occasional billionaire subsidizing a Presidential contender?
Should there be twelve aerospace firms in the United States capable of building bombers and jet fighters, as there were in the 1950s? Or is three sufficient, as we have today? Should we let the Chinese invest in Lockheed-Martin? Should we let Mitt Romney’s Bain Capital acquire Northrop-Grumman and begin selling off pieces to enrich stockholders? Should the US Army make rifles in its own arsenals or purchase them from American manufacturers? Does the US Navy need another $10 billion nuclear powered aircraft carrier, or 10 new oil-burning destroyers? Are these purely economic issues? Would you expect that economists in Moscow or Berne or Bogota — fellow scientists! — would universally agree with, say, Paul Krugman’s take on these issues? Or John Cochrane’s?
Wouldn’t it be nice to take courses where such issues are discussed? I’m sure you can find professors who would be pleased to teach such courses. I’m sure you can find dozens or even hundreds of dispassionate number-crunching grad students who would fit in happily, participating without feeling urgent needs to send trollish counterarguments and insults to Twitter. Sure.
Less this come across as a little blue-skyish, I’m actually thinking back to an actual MIT poly sci course, 17.31 if memory serves, which was taught by a professor who made regular trips to Washington D.C. to give advice to President Lyndon Johnson. It had twelve students as I recall. I was the only undergrad, and the token right winger as it turned out, and I got a B. I mean, like Arnold says, these things did happen.
From my experience a lot of Defence economics (yes, Defence – I’m Australian) is ex post justification and bad industry policy promoting boosterism related to defence industries.
On the anti terrorism front, one bright shining hope is the work on risk analysis for Cato and others by John Mueller and Mark Stewart. Google them.
Eric Lofgren suggests the lack of economics (public) research in the defense arena might be due to “field exhaustion.” Yet, so many interesting questions in economics with applicability to defense remain unresolved. To name a few:
– Optimal organizations a’ la Oliver Williamson (recent Nobel laureate)
– incentive comparability in large organizations
– optimal structure of the defense industry
– buy or build decisions
– optimal auction structures (re: defense contractors)
– and in macroeconomis: measuring multipliers on defense spending.
I suspect that this is now a subset of the economics of conflict, and you sometimes see that getting taught.