Introduction

Abstract

Economic analysis is not about the velocity of the money supply or derivative valuation in financial markets, or any other technical calculation. It’s about people: people who make decisions in a condition of scarcity, and the incentives, resources, and constraints that drive them. Whether talking about the marketplace for goods and services, or in political life played out on the world stage, individuals, not institutions, make the decisions. The United States didn’t decide to walk out on the Soviet Union at the 1986 Reykjavik Summit; Ronald Reagan walked away. Saddam Hussein, not a political entity called Iraq, made the choice to invade Kuwait in 1990. It was Commander-in-Chief Bill Clinton who decided to launch cruise missiles toward Sudan, Bosnia, and Iraq. In statecraft, the stakes are not always this high, but individual people make the choices. Someone chooses from limited options. Economic instruments of security policy employ economic analysis to understand what those options are and how the decisions are made.