Economics
College of Humanities and Social Sciences

Political Economy of Military Weapon Systems Acquisitions

Jonathan Ritschel

Major Professor: Charles K Rowley, PhD, Department of Economics

Committee Members: Richard E. Wagner, Stephen Fuller

Enterprise Hall, 318
June 13, 2011, 10:00 AM to 07:00 AM

Abstract:

The military weapon system acquisition process is complex. Understanding the output of that process requires a broad knowledge of the institutional and public choice framework within which it operates. Analysis that limits examination to internal bureaucratic components at the neglect of this broader perspective can lead to faulty and misleading conclusions. Thus, this dissertation demonstrates the importance of a holistic political-economy construct and differentiates between the public interest and public choice theories of the regulatory process through three related essays.

The first essay demonstrates that the military budgetary process is best characterized through an emergent theory of public finance where competition and entities from the bottom-up shape the budget. Acquisition reform initiatives are explained as natural outcomes of this polycentric process. The second essay probes deeper into a specific acquisition reform: the Nunn-McCurdy Act. Although the Nunn-McCurdy Act threatens cancellation of military acquisition programs that breach cost growth thresholds, the data reveals that threat is rarely enforced. Rather econometric analysis demonstrates the Nunn-McCurdy Act is primarily a monitoring mechanism used by legislators for the purposes of rent extraction. These findings are in concert with the public choice view of the regulatory process. The third essay applies political-economy modeling to cost variance analysis in military weapon system contracts. It finds the inclusion of political variables result in much better fits for both development and production contract models.

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