Forward-Looking versus Shortsighted Defense Budget Allocation

Ronen Bar-El, Kobi Kagan and Asher Tishler
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Ronen Bar-El: Department of Economics and Management, Open University of Israel, Raanana, Israel, ronenba@openu.ac.il
Kobi Kagan: Department of Economics, Bar-Ilan University, Ramat Gan, Israel
Asher Tishler: Faculty of Management, Tel Aviv University, Israel

Journal of Conflict Resolution, 2010, vol. 54, issue 4, 638-662

Abstract: This study presents an analytical model of budget allocation into military and civilian expenditures within an arms race between two rival countries and compares the consequences of shortsighted (period-by-period) planning versus forward-looking (long-term) planning. The authors show that although shortsighted planning is favorable for both countries, they are likely to be locked in a prisoner’s dilemma in which both overinvest in arms procurement. The likelihood of overinvestment in arms procurement is higher when the perceived benefit from security is higher and when future benefits from existing arms stocks are ‘‘high’’; that is, when the rate of technology improvement over time is lower, the depreciation rate of existing arms is lower and the discount factor is higher. A dynamic version of Kagan et al., employing real-world data, finds evidence for the existence of a prisoner’s dilemma in the Israeli—Syrian arms race.

Keywords: arms race; intertemporal defense budget allocation; prisoner’s dilemma; shortsighted planning; forward-looking planning (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:sae:jocore:v:54:y:2010:i:4:p:638-662

DOI: 10.1177/0022002710361939

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