Essays in Defense Economics

Garrett R Wood

Major Professor: Christopher Coyne, PhD, Department of Economics

Committee Members: Peter Boettke, Peter Leeson

Buchanan Hall (formerly Mason Hall), #D100
April 18, 2019, 04:00 PM to 04:30 PM

Abstract:

My dissertation consists of three chapters on defense economics. The first chapter examines issues related to substitution and knowledge problems with respect to use of improvised explosive devices in Iraq and Afghanistan. Belligerents could in principle avoid the ex post costs of conflict by revealing all private information about their violent capabilities and then calculating odds of success ex ante. Incentives to misrepresent private information for strategic gain, however, can cause miscalculations that lead to war. I argue some private information can lead to miscalculation not because it is purposefully misrepresented for strategic gain but because it is too decentralized to be easily revealed. The decentralized private information that produces improvised weapons requires a process of discovering suitable local resources and battlefield testing driven by local military entrepreneurs which frustrates information revelation. Decentralized private information used to improvise new weapons and capabilities like those which emerged in Afghanistan and Iraq show that it can take many years, decades, or even an indeterminate amount of time for fighting to reveal relevant information about violent capabilities.

The second chapter explains how private citizens in Ukraine overcame the free rider problem in their voluntary provision of the public good of defense. National defense is the hard case for the voluntary provision of public goods because without recourse to taxation it is difficult to overcome the free-rider problem, much less provide defense superior to that of government provision because of the large costs associated with national security and war-making. The theoretical explanations for how collective action problems can be solved privately generally have not been brought to bear on national defense, despite being applied to other public goods. I use the theoretical solutions to the collective action problem provided by Olson to understand the extensive private provision of national defense by Ukrainian citizens in their war against Russian-backed separatists. By reducing the size of the population in question and focusing on uniquely high return types of military capital, private defense charities attracted donations sufficient to supply critical funding and military materiel in places the Ukrainian government had failed to do so.

The third chapter uses primary source documents from the Soviet Union to discuss the difficulties with creating a complete defense function. The Socialist Calculation debate revealed the problems advocates of the rational and centralized planning of an economy faced in their work on defining and operationalizing a social welfare function. These problems also plagued many aspects of the inspiration for socialist planning: defense functions derived from the military. I use recently declassified articles from the Soviet Union’s premiere journal of military theory to illustrate the theoretical and practical issues they had to contend with in their attempts to develop fully modeled and fully centralized military planning. These issues closely mirror those brought up during the debate over rational planning of the economy and undermine the foundation of the socialist position as articulated during the Socialist Calculation Debate.