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This chapter has only for an ambition to introduce the present book with obiter dicta about the bridge between defence ‘realm’ and economics ‘realm’ named ‘defence economics’. Especially to non-French readers it proposes some insights into the French defence institutions and policy which could be startling, by nature and by the fact that the French reality is rarely presented in defence specialised journals. To realise the introductory function, the chapter reviews 100 papers, which were available online at the beginning of 2011 spring, and tries to classify them along the lines drawn from a tentative to define precisely the concept of defence policy, for the sake of the too rare students interested in defence studies.

This chapter discusses the ongoing transformations of the French defence support. Considering the importance of economic activities related to defence support, this contribution aims at discussing the evolution of defence support and its costs for the State. The literature in defence economics presents very little analysis of defence support in its different forms. Neither space nor base locations have been deeply analysed in such a literature. We try to bridge this gap in an original research framework. We focus on the Maintenance, Repair and Overhaul (MRO) of defence platforms. More particularly, we focus on the array of measures that surround French defence support in MRO since the end of the 1990s. Considering both economic and spatial leverages, how can the organisation of MRO be optimised? With concepts from spatial economics, we propose a new look on the defence support system. We examine new economic interconnections (e.g. Public Private Partnerships and outsourcing) between military and civilian activities. More broadly speaking, this path of research could help us to better understand the new type of economic interrelations between defence organisation and ‘territory’ as a social fabric.

The improvement in the efficiency of public management leads to an increase in the quality of services, boosting confidence in institutions and thus generating a multiplier effect. This paper aims to update the literature on the data envelopment analysis (DEA), which uses a frontier methodology, for measuring the efficiency applied to the defence sector.

Two main research areas are related through this study: Defence Economics and Efficiency and Productivity Analysis. The frontier methods for measuring technical efficiency are grouped into parametric, non-parametric and semi-parametric. The DEA literature review in the selected sector allows to identify three main fields of work that are discussed in detail.

Existing empirical research has hardly applied bootstrapping methods to remove bias from the estimates. No empirical work has applied an analysis of efficiency determinants by the inclusion of exogenous variables.

The managerial implications of efficiency are numerous. A line of research is proposed to examine the extent to which efficiency improvements have an impact on reputation and, therefore, on the image of and confidence in institutions. The link between Defence Economics and Corruption Economics is also considered.

La mejora de la eficiencia de la gestión pública conduce a un aumento de la calidad de los servicios, impulsando la confianza en las instituciones y generando así un efecto multiplicador. El presente trabajo tiene por objeto actualizar la literatura sobre la metodología frontera de medición de la eficiencia DEA, aplicada al sector de la Defensa.

A través de este estudio, se relacionan dos áreas principales de investigación: Economía de la Defensa y Análisis de Eficiencia y Productividad. Los métodos frontera para medir la eficiencia técnica se agrupan en paramétricos, no paramétricos y semiparamétricos. La revisión de la literatura DEA en el sector seleccionado permite identificar tres campos de trabajo principales que se discuten en detalle.

La investigación empírica existente apenas ha aplicado métodos bootstrap para eliminar el sesgo de las estimaciones. Ningún trabajo empírico ha aplicado un análisis de determinantes de la eficiencia mediante la inclusión de variables exógenas.

Las repercusiones de la eficiencia en la gestión son numerosas. Se propone una línea de investigación para examinar en qué medida las mejoras de la eficiencia repercuten en la reputación y, por consiguiente, en la imagen y la confianza en las instituciones. También se considera el vínculo entre la Economía de la Defensa y la Economía de la Corrupción.

In 1969, Warren Nutter left the University of Virginia Department of Economics to serve as the Assistant Secretary of Defense for International Security Affairs in the Nixon administration. During his time in the Defense Department, Nutter was deeply involved in laying the groundwork for a military coup against the democratically elected president of Chile, Salvador Allende. Although Nutter left the Pentagon several months before the successful 1973 coup, his role in Chile was far more direct than the better-known cases of Friedrich Hayek, Milton Friedman, James Buchanan, and Arnold Harberger. This chapter describes Nutter’s role in Chile policymaking in the Nixon administration. It shows how Nutter’s criticisms of Henry Kissinger are grounded in his economics, and compares and contrasts Nutter with other economists who have been connected to Pinochet’s dictatorship.

States that the end of the Cold War created expectations of a peace dividend. Analyses and critically evaluates the set of myths about this dividend which emerged. Reviews the response of defence industries to disarmament and provides evidence from the UK.

The use of offsets is one of the main characteristics of international defence trade. The rising costs of defence equipment and the significant contraction of defence spending have resulted in an environment that favoured the use of offset policies, the latter becoming increasingly demanding in both quantitative and qualitative terms. The chapter analyses the role of offsets on the process of integration of defence equipment markets, with a specific focus on the EU. Particular attention is given to the offset-relevant regulation and practice and to their recent evolution in the EU following the adoption of European Directive on defence and security procurement (81/81/EC). Offsets play a dual role with regard to the integration of defence industries: on one hand they can be trade-distorting and contribute to the survival of inefficient suppliers in arms importing countries; on the other hand, they can contribute in overcoming barriers that may otherwise prevent some potentially efficient suppliers from accessing the supply chains of the big system integrators. The chapter draws the attention on the need to complement the regulatory evolution by further initiatives aiming at improving the access of non-incumbent suppliers to the supply chains of the large defence system integrators.

This paper examines the relationship between defense spending and budgetary allocations to various programs for twelve Middle Eastern and North African/Mediterranean countries in an attempt to see if spending patterns vary systematically with changes (both anticipated and unanticipated) in the budget deficit or defense expenditures. Detailed results are presented for Syria and Oman although general patterns are discussed for all countries. Not surprisingly, we found that budget tradeoffs are complex and reflect different priorities across countries. Increases in deficits can either offset or reinforce changes in defense spending. Defense and socio-economic tradeoffs vary considerably depending on whether the country spends relatively a lot or little on defense. We conclude that there are probably some long-run costs associated with sample countries cutting growth intensive programs to accommodate defense.

This chapter presents a general equilibrium model that embeds the issue of national security within a two-country Heckscher–Ohlin model of international trade. “National security” is defined as a public good that is an increasing function of a country's own defense expenditure and a decreasing function of the other country's defense expenditure. Defense is a non-traded public good produced by capital and labor, along with two tradable private goods in each country. The model is solved as a Nash equilibrium in defense expenditures and a Walrasian equilibrium for the two traded goods and the factors of production. It is shown that opening to international trade raises defense expenditures in each country since national security is a normal good in each of them. If defense is more capital-intensive than both tradable goods then trade lowers the cost of defense for the labor-abundant country and raises it for the capital-abundant country.

Saul (Shaul) Arlosoroff graduated from the Israel Institute of Technology (Technion) in mechanical engineering (1953 – BSc, and 1954 – Dipl. Eng.) and later graduated from the Tel Aviv University/Management school – with MBA in public enterprises and economics (1970–1972). For over 50 years he has been involved in urban and rural water resources management, supply and demand aspects, in over 40 countries. He served as the World Bank Program Manager for water and sanitation (1981–1992), residing in Israel serving as an international consultant on mainly regional and local water and sanitation, and related conflicts, and political issues. He has published various articles within books and scientific events.