Allocating Security Expenditures under Knightian Uncertainty: An Info-Gap Approach

Michael Ben-Gad, Yakov Ben-Haim and Dan Peled

Defence and Peace Economics, 2020, vol. 31, issue 7, 830-850

Abstract: We apply the information gap approach to resource allocation under Knightian (non-probabilistic) uncertainty in order to study how best to allocate public resources between competing defence measures. We demonstrate that when determining the level and composition of defence spending in an environment of extreme uncertainty vis-a-vis the likelihood of armed conflict and its outcomes, robust-satisficing-expected utility will usually be preferable to expected utility maximisation. Moreover, our analysis suggests that in environments with unreliable information about threats to national security and their consequences, a desire for robustness to model misspecification in the decision-making process will imply greater expenditure on certain types of defence measures at the expense of others. Our results also provide a positivist explanation of how governments seem to allocate security expenditures in practice.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/10242694.2019.1625518 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Allocating Security Expenditures under Knightian Uncertainty: an Info-Gap Approach (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:defpea:v:31:y:2020:i:7:p:830-850

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/GDPE20

DOI: 10.1080/10242694.2019.1625518

Access Statistics for this article

Defence and Peace Economics is currently edited by Professor Keith Hartley

More articles in Defence and Peace Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().