economics of conflict, war, and peace

Economics of Conflict, War, and Peace

Prof. Dr. Jurgen Brauer; Summer 2009Chulalongkorn University; Bangkok, Thailand

Session 3.1Manpower: official state forces

Prof. J. Brauer; Summer 2009 Chulalongkorn U., Bangkok

Economics of Conflict, War, and Peace Session 3.1 2

Admin matters

Make-up class (for midterm exam) F 19 June, 1:30-4:30pm; Econ Bldg Rm 409

Sample midterm exam questions [they may not all have the same weight] 1. Use the PPF model to explain the static guns vs butter tradeoff and

show diversion, destruction, and disruption. 2. What happens in Boulding’s LSG model when the slopes of the

strength gradients change? Or when the height or distance parameters change? Or when all of them change simultaneously? How can this model explain arms races? What, if any, suggestions does it contain to stop arms races? Explain and explore.

3. Should the international arms trade be free but taxed? Illustrate and discuss.

4. Discuss the Edgeworth Box model of exchange and specialization, and show how the economics of appropriation or security economics can be added into the model.

5. Discuss transnational and transgenerational public goods (or bads) with special application to the security economics problems facing the world today.



Manpower

(1) official forces Conscripts Volunteers (all-volunteer force, AVF)

(2) private forces (“mercenaries”) Private military companies (PMCs) Private security companies (PSCs)

(3) irregular forces Militia, rebels/revolutionaries, uprisings/mobs,

terrorists, bandits, organized crime (?)

“privates”

“involuntary”

private vs stateemployer”?

but the stateoften employsPMCs/PCSs



Manpower: official state forces Official state forces

Conscription Volunteers (all-volunteer force, AVF)



Manpower: official state forces

Green: no armed forces (Costa Rica, Greenland, Haiti, Iceland, Panama); blue: no draft; orange: draft scheduled to be abolished; red: draft; grey: no informationSource: Wikipedia “conscription”



Manpower: official state forces Military manpower decisionmaking

How many resources to expend on military capability? How many people to bring into the military, both in absolute

and in relative (percentage) terms? Front-line vs back-office staff (tooth-to-tail ratio)

Depends, in part, on the quality of the manpower and the quality of military hardware

Productivity of military manpower helps determine the demand for military manpower

Optimal amounts of Training Manpower experience and quality Active to reserve forces Volunteer, conscripted, or mercenary forces




Source: Simon/Warner; EPSJ 2(1) 2007, p. 20.

Active vs reserveforce use



Manpower: official state forces Illustration: promotions

Members of a volunteer force usually compete for promotion (just like in private firms)

Conscripts need more costly performance monitoring Vertical composition of the force

More weighted toward entry-level positions when lateral entry is restricted; bottom-heavy large base; promotion via “up-or-out” rules; implies large, and costly, force

Junior ranks are based on skills but … senior ranks are based on a play-off or tournament

where many compete but only few succeed to promotion This can cause incentive problems to obtain optimal

performance



Manpower: official state forces Supply decisions

depend not only on military planners but on (potential) force members

Enlistment/re-enlistment decisions Foregone civilian opportunities; post-military civilian

opportunities; pay-scales; incentive bonuses; structure of retirement vesting; education, housing, medical benefits; community demographics, attitudes, values, and belief systems, and so forth

tools, means, and incentives made available to recruiters



Manpower: official state forces Demand side considerations

Smoothing of force levels through peak-load military demands Voluntary Separation Incentives (VSI’s) Selective Separation Bonuses (SSB’s)

Cohort planning; demand = 300 members C1 (old) = 100; C2 (medium) = 100; C3 (young) = 100 C1 becomes vested in retirement benefits and leaves Now demand drops to 250 members C2 (old) = 100; C3 (medium) = 100; C4 (young) = 50 Thus, the experience (productivity) composition changes Eventually, C4 will be “old” the leaders, but there are only a

few of them



Manpower: official state forces Conscription

Baseline argument: conscription is involuntary servitude, outlawed in almost every respect – except for the military (“national service”)

In the past, true volunteering was not uncommon E.g., New Zealanders volunteering to fight with/for Britain in

the Boer War (South Africa; 1899-1902) Conscription became with norm with the Napoleonic wars

of the early 1800s; the need to staff mass armies Only with the end of the Cold War is the pendulum

swinging back to volunteer armies (although in the U.S. already since 1973)

In late 2006, of 26 NATO members only 8 still had conscription




Conscription amounts to unequal exchange Conscript surrenders labor in exchange for which he receives

something (subsistence) he would otherwise not have taken Involuntary trade suggests unequal trade Lack of freedom usually an indication of inefficiency

Conscription is a (curious) in-kind tax Reduces budgetary outlays, but only by deflecting the cost to

conscripts/draftees This cost affects just part of the population: young males Moreover, this cost affects just THAT part of the young, male cohort

that is actually drafted; if 10,000 are needed out of a cohort of 100,000, each has a 1-in-10 chance to be drafted

The draft is a lottery; and that means the in-kind tax is imposed by lottery

No other tax in a state is imposed by lottery!




Draft also discriminates by age, gender, skill, and time Draft is imposed by the old on the young, by females on

males, by the unskilled on the skilled, by the present on the future (as the draft delays acquisition of education and work experience)

Draftees’ lifetime earnings tend to be lower than those of non-draftees (5% or more) Lower education; delayed entry into private work life =>

human capital not accumulated as much Dynamic cost (cost over time) accumulates in lower GDP In the U.S. post-conscript era, there appear no wage and

life-earnings differentials




All taxes entail avoidance/evasive behavior Draft “dodging” (Presidents Clinton/Bush Jr.) South Africa during apartheid: emigration of young men Russia today: fake medical certificates, bribery Turkey today: pay “buy-out” money to state (“commutation”)

This converts in-kind tax to money-tax | conscripts self-select: pay in-kind (no alternative civilian option) or pay money-tax (better alternative civilian option)

Undesirable military effects Distorts choice between capital and labor (K/L substitution) Govt’s overinvest in cheap manpower; underinvest in equipment But modern militaries rely on high-tech modern weaponry perhaps

best not left to 2-year recruits Empirical studies show that professional armies do in fact have

higher K/L ratios and are better (more productive) fighting forces




No empirical evidence that Conscript armies fight less often than volunteer armies Are more equally drawn from all segments of society Are subject to a higher degree of democratic control Display a higher sense of civic duty

Empirical evidence that Conscript armies fight more often than volunteer armies – and

more unpopular wars (e.g., France in Algeria; U.S. in Vietnam; Russia in Afghanistan)

Are often more elitist (the Philippines) than volunteer armies Democratic states with conscript armies succumb to military

coups (e.g., Turkey, repeatedly) Conscript army: selective tax | volunteer army: broad-based

tax => more “civic duty” in the latter case




The particular political allure of the draft stems from its selective effect:

a small group of primary victims: young males, about age 18-20 that pay the in-kind (or commutation) tax …

… and the removal of a conscript army from democratic control If conscription is so bad, why has it persisted until recently?

Basically, two arguments Size of the needed force Military productivity

It can be shown that if the size of the needed force is large AND if the productivity differential between conscripts and volunteers is small, the economic cost may be lower with a conscript army



Manpower: official state forces Conscription vs AVF

The size argument n = 3 civilians; n1 = $10/hr; n2 = $15/hr; n3 = $20/hr AVF:

If there is one military opening, it needs to pay at least $10.01/hr If there are two: at least $15.01/hr to both (total: $30.02)

Note: MC(L) = $20.01 If three: $20.01/hr to all three (total: $60.03)

Note: MC(L) = $30.01 => monopsony model later Conscripts, say, cost $15/hr | now compare …

An army of 1: $15.00 vs $10.01 [prefer AVF] An army of 2: $30.00 vs $30.02 [~ indifferent] An army of 3: $45.00 vs $60.03 [prefer conscripts]




Q

P

SL=ΣMCL under competitive conditions

DL=ΣMBL

Q* Q*

P*

P*

AVF vs conscription: S/D model

DL=ΣMBL

Nonmarket solution with below market price (price ceiling)

Shortage of voluntary supply is remedied by coercion (draft; conscription; forced labor)




Q

P

SL=ΣMCL under competitive conditions

MCL - undermonopsonyconditions

DL=ΣMBL

Q*Q*

P*P*

But first recallmonopoly case

Q

PMC

ATC

MR

D

AVF vs conscription: monopsony model

$15

$20



Manpower: official state forces Conscription vs AVF

The (crass) productivity argument If n=3 conscripts at $45/hr kill 45 enemies => that’s 1

enemy per dollar spent If n=2 volunteers at $30.02 kill 45 enemies => that’s 1.5

enemies per dollar spent Empirical studies for U.S.

Post-1973 AVF is more productive Turnover rates dropped from 21 to 15% Average length of stay increased from 4.7 to 6.5 years Average age increased from 25 to 27.6 years Individual and unit-performance measures improved



Manpower: official state forces Since 1991 (post-Cold War)

Armies have become smaller and more sophisticated equipment, tactics, strategy are used …

… tilting advantage away from mass conscript armies, certainty for NATO Europe

economics of conflict, war, and peace

Documents

peace session

bangkokeconomics of

avfeconomics of conflict

jurgen brauer summer

official state forcesgreen

military capability

security economics problems

economics of appropriation