Marcus Matthias Keupp - Defense Economics: An Institutional Perspective

A new scientific truth does not generally triumph by persuading its opponents and getting them to admit their errors, but rather by its opponents gradually dying out and giving way to a new generation that is raised on it.

Max Planck

This book is the international edition of a volume that first appeared in 2019, in German and French. The idea behind it is to offer an alternative view on defense economics by grounding the subject in institutional theory and the Austrian school. This book features the central idea that all economic problems in a military organization have institutional causes.

There is a dearth of such perspectives in contemporary defense economics research. Few perspectives put a hard truth at the center of their analysis: Contemporary armed forces are not-for-profit organizations controlled by state bureaucracies. These exert their control by operating a planned economy system that allocates a fiscal commons (the defense budget) to the different branches of the armed forces. In order to finance operations and fund investments, a complex interaction between political decision-makers, the private industry, state bureaucracy, and the military staff determines how armed forces may partition and spend these funds. What could possibly go wrong?

The author holds the chair of defense economics at the Military Academy at the Swiss Federal Institute of Technology Zurich. However, this book is not about the Swiss Armed Forces. The economic analysis treats defense economics in a generalizable way, without delving into the organizational depths of any specific armed force. It emphasizes that the economic problems described here exist in any armed force in which a state bureaucracy exercises economic control. Consequently, all statements in this book represent solely the author's opinions and analyses; in particular, they do not constitute an official communication from the Swiss Armed Forces or the Federal Department of Defense, Civil Protection, and Sport.

I have completely reviewed and revised for an international audience. I thank Holly Cogliati and Kilian Cuche for their help with editing and proofreading. All the comments received from Renaud Bellais, Fabian Muhly, Dimitri Percia David, Mauro Mantovani, and Daniel Ltsch helped to improve prior versions of this manuscript. Many thanks also go to Christian Rauscher and Nikos Chtouris, from Springer Nature, for making this edition possible.

Finally, I must thank the many staff officers and career officer candidates I met and taught at the Military Academy, all of whom offered their views of and insights into actual military organizations. Their comments and discussions greatly helped me shape this book. Finally, I thank the commander of the Military Academy, Brigadier General Peter C. Stocker, for all his support during the writing of this work.