Short-term versus long-term military planning
The Economics of Peace and Security Journal
C ountries involved in an ongoing (military) conflict are usually caught up in an arms race and spend considerable resources to ensure an acceptable level of security vis-à-vis their rivals. For example, the base defense budget of the United States for 2009 is $515.4 billion, 1 and Israel's defense budget in 2008 was $11 billion, about 7.4 percent of its GDP. Both the U.S. and Israel allocate considerable shares of their defense budgets to procurement (mostly of sophisticated weapon systems)
... weapon systems) and to military R&D. For example, in 2009 the U.S. plans to spend $79.6 billion on military R&D activities and $104.2 billion on procurement. 2 The considerable resources that are committed to military build-up around the world and the substantial efforts of rival countries to achieve a military edge over their adversaries indicate that in allocating their resources between civilian (education, welfare, health, etc.) and military expenditure governments account for long-term considerations, at least when they plan their military order of battle (arrays). 3 In this article, we analyze two rival countries that are involved in an arms race. We compare the consequences of myopic (period-by-period) planning versus rational (long-term) planning and show that although myopic planning is always favorable for both countries, they are likely to become locked in a prisoners' dilemma equilibrium in which they plan rationally but which results in overinvestment in arms procurement and underspending on civilian services. In general, they would be well-advised to consider other strategies to improve the welfare of their citizens without compromising their required security levels. A dynamic version of Kagan, Levkowitz, Tishler, and Weiss (2008) is employed, with real-world data, to show the likely existence of a prisoners' dilemma in the current Israeli-Syrian arms race. The nature of arms race planning strategies Since Richardson's seminal contribution, 4 economists have been analyzing arms races as a noncooperative game between two or more rival countries, each intent on accumulating weapon systems to build up their respective military power. The discussion has focused, among other issues, on the nature of the dynamic strategies adopted by the decisionmakers of the rival countries when allocating the government budget between arms procurement and civilian expenditure and on the characteristics of the resulting (Nash) equilibrium. Some researchers have considered open-loop Nash equilibrium strategies while others have considered closed-loop Nash equilibrium strategies. 5 The choice between them may not be critical as they exhibit similar properties, although a closed-loop equilibrium results in lower arms stocks and higher welfare than does an open-loop equilibrium. 6 Furthermore, the static Nash equilibrium exhibits the same properties as the open-loop Nash equilibrium. 7 There is also the conclusion of Brito and Intriligator (1995) that "since the actual mechanism involved in the allocation of resources in the countries involved is a complex combination of political and bureaucratic behavior, there is some virtue in simplicity." Previous literature considers the strategies undertaken by the participants in the arms race as given (open-loop or closed-loop). In this article, as is the case in reality, we let the decisionmakers of the rival countries decide on the planning strategy, in addition to the allocation of the government budget between arms procurement and civilian expenditure. The decisionmakers can be either myopic, planning only one period at a time (time-step planning), or rational, determining, at the beginning of the first period, the allocation of the government budget, taking the rival's decisions into account, for the whole planning horizon (e.g., open-loop strategy). Generally, this article suggests that solving military/political conflicts that evolve into an arms race by relying only on military might is an expensive and suboptimal solution. The better approach in an arms race setup is to consider political and economic strategies, in addition to the military option. The growing importance of planning ahead As weapon systems are becoming ever more sophisticated, the planning horizon plays an important role in their accumulation and in the overall military power build-up. 8 The development of a major weapon system involves several consecutive stages, each dependent on the previous one: technology feasibility study, pre-development, full-scale development, testing, integration, prototype, serial production, field deployment, and achieving full operational capabilities. This process may take 20 years or more to complete. 9 Even weapon systems that do not require full-scale development (weapon systems developed in the past) may require a considerable amount of time to upgrade and modernize. For example, the time from the procurement stage of a submarine to its full integration into the navy may be up to 10 years. Thus, the time it takes for a new weapon system to be fully deployed forces the In this article, we analyze two rival countries that are involved in an arms race. We compare the consequences of myopic (period-by-period) planning versus rational (long-term) planning and show that although myopic planning is always favorable for both countries, they are likely to become locked in a prisoners' dilemma equilibrium in which they plan rationally but which results in overinvestment in arms procurement and underspending on civilian services. Some options to break out of the dilemma are explored.