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Efficiency of Military Performance

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Defense Economics

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Abstract

Effectiveness is a necessary but not sufficient condition by which analysts must judge military capabilities. Their assessment must also consider the efficiency with which combatants generate them, i.e., the relationship between capabilities created and the resources consumed during this creation. Efficiency is therefore a measure of the extent to which time, material, and human resources are transformed into productive outcomes. Low efficiency is always a sign that the economic principle was violated (squandering of inputs, unproductive use of working time, wastefulness, inferior technology used, etc.). The less material and human resources are used to generate any given intensity and quality of military capabilities, the more efficient this creation is. An efficiency assessment analyzes only the production side and makes no conclusions about the effectiveness of the capabilities. As a result, a full assessment of military performance must consider both its effectiveness and its efficiency.

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Notes

  1. 1.

    The (presumed) saying of Pyrrhus after the Battle of Ausculum (‘another such victory, and we are lost’) illustrates this consideration. The battles of the Somme (1916) and Verdun (1916) are also examples of extreme disparities between resource input and operational success.

  2. 2.

    Assuming a homogeneous and consistent product structure and quality.

  3. 3.

    Contemporary private military companies cover only a fraction of the services provided by a military organization. In particular, they rarely offer a massive use of force or heavy weapon systems.

  4. 4.

    The x-efficient point is the point of maximum resource efficiency under imperfect competition. Although imperfect competition causes actual efficiency to be lower than the theoretical optimum, the specific organization cannot increase its efficiency beyond this point unless it reorganizes or market conditions change. As armed forces typically have no competitors within the nation state, they should prefer x-efficiency to neoclassical efficiency.

  5. 5.

    For this reason, politicians must spend subsidies as they attempt to attract private firms to structurally weak constituencies, because the economic-geographic optimization these firms require would dissuade them from investing in sites that are remote or lack infrastructure or local labor supply.

  6. 6.

    Foreign manufacturers and service providers may bill products and services rendered in foreign currency. Therefore, the armed forces must consider not only the domestic, but also the respective national inflation rates of all international arms manufacturers and private firms from whom they buy goods and services.

  7. 7.

    The opportunity cost of institutional growth can be calculated by dividing a combatant‘s salary and benefits by hours worked. The resulting hourly rate is an estimate of the monetary loss due to the fact that this working hour is spent administering institutions rather than generating military capabilities. Unless the institution in question contributes to this generation, the cost of any working hours spent complying with it is sunk and hence lost.

  8. 8.

    This effect is comparable to the substance degradation of real estate managed under an institutionally defined rental-price control regime (Jenkins 2009; Block 2002).

  9. 9.

    However, the transition to a system of professional combatants often requires a specialization of military capabilities and therefore generates novel yet differently structured demand.

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Authors and Affiliations

  1. Swiss Federal Institute of Technology, Military Academy, Birmensdorf ZH, Switzerland

    Marcus Matthias Keupp

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Keupp, M.M. (2021). Efficiency of Military Performance. In: Defense Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-73815-0_4

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