DEFENSE ECONOMICS

field of national economic management concerned with the economic effects of military expenditure, the management of economics in wartime, and the management of peacetime military budgets. The field of defense economics arose in response to the vastly increased scale on which warfare was waged and armed forces were maintained in the 20th century. The increasing expense of military technology also greatly enhanced the impact of war and defense preparedness on national economies. War is inevitably costly. Its costs include the foregone earnings of those killed or injured in it; the lifetime medical care devoted to those permanently incapacitated by it; the physical capital destroyed or damaged in a conflict; the cost of supplying the armed forces with the weapons of war; the cost of sustaining those armed forces; and the losses to the economy caused by the diversion of resources from peaceful investments in future economic capacity. To avoid the costs of war, most countries seek to deter aggression by allocating resources for a minimum level of military capability, so that the cost to an aggressor of initiating a war will far exceed any likely gains. Those nations that do become involved in a war must devote a far higher proportion of their total economic production and government budgets to military expenditures than they did even while following policies of deterrence in peacetime. The fiscal and monetary policies that a government uses to finance its conduct of war are collectively known as war finance (q.v.), which constitutes a branch of defense economics. Aside from war finance, the prime concern of defense economics has been directed toward the issues of the allocation of resources between the military and civilian sectors and toward the possible effects of this allocation on the national economy. In the nuclear age, economists have also become concerned with the question of allocation within the armed forcesi.e., with the size and character of the armed forces and with the choice and design of their weapons. In fact, modern defense planning and weapons development pose extremely complex problems, and efforts to rationalize the decision-making processes in these fields in the post-World War II decades have led to the creation of many new management techniques that have rapidly spread into civilian use. field of national economic management concerned with the economic effects of military expenditure, the management of economics in wartime, and the management of peacetime military budgets. Additional reading Gavin Kennedy, Defence Economics (1983), is a general survey written for the nonspecialist and providing information on a broad spectrum of questions of military appropriations and expenditures. Historical studies include J.M. Winter (ed.), War and Economic Development (1975), addressing the economic consequences of war on the preindustrial economies of Europe; Gautam Sen, The Military Origins of Industrialization and International Trade Rivalry (1983), exploring the influence of military technology on the industrial development of Europe; and Emile Benoit, Defense and Economic Growth in Developing Countries (1973), challenging the assumption that defense spending is incompatible with economic growth and attempting to show that defense spending has actually assisted economic development in some Third World countries. Saadet Deger and Robert West (eds.), Defence, Security, and Development (1987), is a collection of articles by scholars from several countries who criticize Benoit's method and conclusions and provide a more complex assessment of the connection between economic growth and national security. A detailed study of governmental defense planning in poorer economies is presented in Stephanie G. Neuman (ed.), Defense Planning in Less-Industrialized States: The Middle East and South Asia (1984). For a view that defense spending inhibits economic performance, based on international comparative data and statistical analysis, see Robert W. Degrasse, Jr., Military Expansion, Economic Decline: The Impact of Military Spending on U.S. Economic Performance, expanded ed. (1983). Christian Schmidt (ed.), The Economics of Military Expenditures: Military Expenditures, Economic Growth, and Fluctuations (1987), collects papers by most of the world's leading specialists in defense economics, providing a rich agenda in the contribution of economic analysis to defense dilemmas.A rare comparative study of defense industries in both capitalist and communist economies of such countries as the United States, the Soviet Union, France, Germany, Sweden, Czechoslovakia, Italy, China, Israel, the United Kingdom, and some representatives of the Third World is provided in Nicole Ball and Milton Leitenberg (eds.), The Structure of the Defense Industry: An International Survey (1983). Gavin Kennedy