Title: Castles, Battles and Bombs

Author: Jurgen Brauer and Hubert Van Tuyll

Date/Publisher:2008/University of Chicago Press'

Thesis: Using Economic principles to illuminate military history. Make the case for a cross-denominational approach to looking at history. Leads to more interesting, and different conclusions. Basis is on neoclassical economics (economics in a perfect world) at the same time they understand this limitation they try and reduce assumptions to clarify the analysis.

By using economics you are using a different paradigm (kuhn) and analyzing according to a common standard, the understanding of their times and our own will be enriched. (157)

Subthemes/Subtopics/Major Arguments:

1. Opportunity Cost – Taking one action costs one the opportunity of choosing another

- Decisions about weapon systems (49)

- Decision to go to war (50)

- deferring definitive deployment (50)

2. Substitution – How much can one thing be substituted for another? If benefit same, will chose lower cost 21

- substitute one contractor with another, locals for armed foreigners, calvary for infantry (115)

3. Diminishing Marginal Returns – “more of a thing is not necessarily desirable.” (25)

What’s the $ of one more? What’s the benefit? WWII Strat Bombing (CBO). More bombs dropped meant that each additional bomb was less effective. ? Armor and mobility

4. Expected Marginal/Incremental Costs and Benefits – if the expected incremental benefit of an action outweighs its expected additional cost, then take that action (12)? preferences, resources and prices 17

5. Asymmetric Info and Hidden Characteristics – BEFORE a decision is reached there is imperfect information.

“Market power can be exploited in that the side with superior information obtains a better deal that otherwise would have been possible.” (29)

· “Signaling and screening help overcome information problems, at a cost.”(30)

· “Hidden characteristics…cause problems before an action is taken or a commitment made [while] hidden action causes problems after an action or commitment is taken.” (33)

Wargaming (156)

Flood of information

Lack of information /disruption

6. Asymmetric Info and Hidden Actions—AFTER a decision is reached there is imperfect information about an action. Principle and agent.

- Use of bonus pay in contracts

· “This highlights the difference between hidden characteristics and hidden actions: the former is about information and information transmittal before a commitment is made, the latter is about incentives and incentive alignment after a commitment has been made. The former is about being truthful, the latter about acting truthfully.” (35)

The High Middle Ages, 1000 – 1300: The Case of the Medieval Castle and the Opportunity Cost of Warfare

· “A king in 1008 was far more aware of the need to make choices than a president in 2008.” (45)

· “Choosing to build castles cost the opportunity to build armies.” (47)

· “Opportunity cost…refers…rather to the highest-valued alternative purchase one could have made.” (49)

· “To determine how much [building castles] cost rulers, we need to know the cost of castling compared with the cost of recruiting an army.” (53)

· “The nub of the problem was that resources invested by an attacker were much greater than those of the defender.” (65)

· “Wales, where he engaged in substantial castle building. It is difficult to escape the conclusion that raising armies proved of much more limited utility to medieval rulers than did castles.” (68)

Multiplicity of roles…castles laid permanent claim to land (60)

Endurance contest that ended without a decisive fight (65) Cyber

The Renaissance, 1300 – 1600: The Case of the Condottieri and the Military Labor Markets

· “The principal is the party requesting a service (the city-state), and the agent is the party contracted to perform it (the mercenary). Contract fulfillment requires that both parties perform the contracted action(s) and is therefore contingent on both parties being able to monitor and enforce contract provisions.” (84)

· “Principle-agent relations are fraught with difficulty, and contracts must be designed and redesigned accordingly, with special emphasis placed on credible enforcement.” (90)

· “The variety and changes in the contracts amply suggest that the parties were addressing disputes by writing their next contract differently.” (93)

· “If the mercenary system of the Italian Renaissance eventually come to an end, it was not for lack of political, legal, or requisite administrative sophistication. Instead it had very much to do with the difficulty of holding parties to contractual promises, with contract enforcement in a word.” (96)

· “As military organization changed, and certainty and permanence were to be found with employing states rather than with employing companies, the soldiery gradually drifted toward the states.”

· “Caferro’s chronicle of the gradual transformation of free-roaming mercenary companies first into semi-permanent, then permanent but locally bound forces conforms to contract-economic and game-theoretic expectation: repeated interaction in a competitive environment would foster the development of reputation effects, signaling of reliability, and an increase in contract certainty and stability.” (107)

The Age of Battle, 1618 – 1815: The Case of Costs, Benefits, and the Decision to Offer Battle

· “The choice of whether to offer any particular battle does not involve the total but rather the expected additional costs and benefits that a battle engagement might bring.” (133)

· “How the individual evaluates and reacts to a specific situation (economic perspective) is the result of how that individual processes information related to that situation (psychological perspective).” (123)

· “What is to be gained from giving battle that otherwise could not be gained and against what cost?” (124)

· “The calculation of expected costs and benefits of each additional engagement in battle then might be said that have had a rational goal: to lower the total cost of war.” (124)

· “Complexity in operations created complexity in calculations.” (131)

· “What stimulated [Gustavus Adolphus’s] attack at Lutzen was that the enemy had divided his forces, giving the Swede his best chance of victory. This constitutes a classic example of expected marginal cost/benefit analysis. All the other circumstances already existed, but the one additional item – a weakening in enemy numbers – led to the decision to attack.” (136)

The Age of Revolutions, 1789 – 1914: The Case of the American Civil War and the Economics of Information Asymmetry

· “The need for information about one’s own forces as well as the enemy’s is virtually insatiable…not only is the need for information insatiable but the information that is available in war often is inadequate, poor, unsatisfactory, and faulty…commanders’ knowledge concerning their own organization is of a far lower order than that of a business owner vis-à-vis his farm.” (164)

· “The telegraph’s effect on information flow was revolutionary.” (166)

· “Prejudices and perceptions were part of the information available to [McClellan], and information can never be disentangled completely from the personality that processes it.” (173) (195)

The Age of the World Wars, 1914 – 1945: The Case of Diminishing Marginal Returns to the Strategic Bombing of Germany in World War II

· This chapter “makes a very specific, if technical point: to demonstrate that continuous increases in the tonnage of bombs dropped, when other inputs to the war effort remain unchanged, eventually yield declining increases in the destruction sought.” (201)

· “Thing about the incremental destructive effect of additional bombing tonnage applied, the marginal effect as economists refer to it.” (204)

· “Evidently, the largest number of aircraft produced occurred during the time period of the most intense bombardment of the industrial sites, in 1944.” (210)

· “When we examine the raw data…, we note that bombing in the 1,000+ ton range reduced the production index to an average of 32.6, whereas production in the 400 to 800 ton range reduced it to 34.8, about the same “bang” for a considerably smaller “buck” of aircraft and crews sacrificed in the attacks.”

· “While we share many authors’ skeptical look at the promise of strategic bombing per se, the specific point we make here concerns only the issue of diminishing marginal returns to strategic bombing.” (213)

· “The principle architects of America’s air war plan calculated that by destroying…124 electric, transportation, and oil targets in all, the Germany economy could be wrecked enough to make the Nazis sue for peace.” (213)

· “At best, the strategic air war appeared to secure modest delays in further increases in Germany production, rather than securing decreases.” (219)

· “In fairness to the Allied war effort, one must of course acknowledge that they suffered from severe information deficits during the war that made an assessment of the bombing’s efficacy difficult.” (227)

The Age of the Cold War, 1945 – 1991: The Case of Capital-Labor Substitution and France’s Force de Frappe

· “Nuclear weapons (capital) might be acquired to substitute for conscripted military manpower (labor) if the price of capital is low relative to that of labor.” (245)

· “That a nuclear force can do things in wartime that conventional weapons cannot does not mean that there can be no substitution. Nuclear weapons may be different, but they can be substituted for conventional weapons – if raw power is the main criterion.” (246)

· “A nuclear balance of power was actually more stable than a conventional one and also set limits to conventional war.” (255)

· “The costs of conventional forces that could strike by air or land and do that much damage [to Moscow as a nuclear weapon] appeared astronomical.” (275)

· “Monopoly always looks like the best system to the monopolist.” (278)

· “Budget choices were made. The nuclear force was substituted for conventional forces, particularly in terms of spending and numbers of personnel and maintenance of national security, and to some extent in the areas of deterrence and defense.” (285)

Economics and Military History in the Twenty-First Century

· “Economics cannot explain everything, but the extent to which its principles illuminate certain behaviors and events suggests a fruitful avenue for military historians to impose structure on description.” (287)

· “Economists’ fundamental proposition is that a terrorist organization…is a rational actor. That is to say that, given its beliefs, its members choose the where, the when, and the how of attacks subject to a set of constraints, which include the production costs if faces, and the labor, capital, institutional, and other resources available to the organization.” (290)

· “It can be shown that governments tend to overinvest in defensive measures and underinvest in offensive measures.” (294)

· Counterterrorist action ought to be broad-based across all countries and agencies…while governments struggle with international counterterrorist coordination, each one of them must beware of terrorist substitution and fortify likely substitute targets…for a terror organization, a low-labor, high-tech attack may be equivalent to a high-labor, low-tech attack…before a person joins a terror organization…that person has an option of choosing to participate in a terror action or a nonterror action…in liberal democracies terror success thrives on the constitutional free-press guarantee…the US cannot simply dispense with coalition-building, fortify its own borders, and deflect terrorists toward non-US targets.” (296 – 297)

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