The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Defence Economics

  • Keith Hartley
  • Martin C. McGuire
Reference work entry


Defence economics is a new field of economics. Its development and research agenda have reflected current events. Examples include the superpower arms race of the cold war, disarmament following the end of the cold war, international terrorism, peacekeeping and conflict. A brief history is presented; the field is defined and the facts of world military spending are outlined; the defence economics problem, namely, the need for difficult choices, is considered; and conflict and terrorism are used to illustrate some of the new developments in the field.


Arms races Arms trade Cost-plus contracts Crowding out Defence economics Disarmament costs Economic theories of military alliances Ethnicity European Security and Defence Policy (EU) Fixed-price contracts Free rider problem Game theory Military employment contract Military outsourcing Military wage differential Military–industrial complex Nationalism One-shot games Principal and agent Private finance initiatives Procurement Public–private partnerships Purchasing power parity Religion Repeated games Research and development Strategic behaviour Substitution effect Substitution principle Technology Terrorism, economics of Tit for tat Two world wars, economics of the Voting paradoxes War and economics 

JEL Classifications

This is a preview of subscription content, log in to check access.


  1. Anderton, C., and J. Carter. 2005. On rational choice theory and the study of terrorism. Defence and Peace Economics 16: 275–282.CrossRefGoogle Scholar
  2. Barros, C., C. Kollisa, and T. Sandler. 2005. Security challenges and threats in a post-9/11 world. Defence and Peace Economics 16: 327–329.CrossRefGoogle Scholar
  3. Benoit, E. 1973. Defense and economic growth in developing countries. Boston: DC Heath.Google Scholar
  4. BICC (Bonn International Centre for Conversion). 2005. Conversion survey 2005. Baden-Baden: Nomos Verlagsgellschaft.Google Scholar
  5. Brauer, J. 2003. Economics of conflict, war and peace in historical perspective. Special Issue, Defence and Peace Economics 14: 151–236.CrossRefGoogle Scholar
  6. Frey, B., and S. Luechinger. 2003. How to fight terrorism: Alternatives to deterrence. Defence and Peace Economics 14: 237–249.CrossRefGoogle Scholar
  7. Goodwin, C., ed. 1991. The economics of national security. Durham: Duke University Press.Google Scholar
  8. Hartley, K. 2006a. Defence R&D: Data issues. Defence and Peace Economics 17 (3): 1–10.CrossRefGoogle Scholar
  9. Hartley, K. 2006b. The economics of conflict. In The Elgar companion to public economics: Empirical public economics, ed. A. Ott and R. Cebula. Cheltenham: Edward Elgar.Google Scholar
  10. Hegre, H., and T. Sandler. 2002. Economic analysis of civil wars. Special Issue of Defence and Peace Economics 13: 429–496.CrossRefGoogle Scholar
  11. Hitch, C., and R. McKean. 1960. The economics of defense in the nuclear age. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
  12. Kennedy, P. 1988. The rise and fall of the great powers. London: Fontana Press.Google Scholar
  13. NATO. 2005. NATO – Russia compendium of financial and economic data relating to defence. Brussels: NATO.Google Scholar
  14. OECD. 2004. Main science and technology indicators. Paris: OECD.Google Scholar
  15. Oi, W. 1967. The economic cost of the draft. American Economic Review 57 (2): 39–62.Google Scholar
  16. Olson, M., and R. Zeckhauser. 1966. An economic theory of alliances. The Review of Economics and Statistics 48: 266–279.CrossRefGoogle Scholar
  17. Peck, M., and F. Scherer. 1962. The weapons acquisition process. Boston: Harvard University Press.Google Scholar
  18. Richardson, L. 1960. Arms and insecurity: A mathematical study of the causes and origins of war. Pittsburgh: Homewood.Google Scholar
  19. Sandler, T., and K. Hartley. 1995. The economics of defense, Cambridge Surveys of Economic Literature. Cambridge: Cambridge University Press.Google Scholar
  20. Sandler, T., and K. Hartley, eds. 2003. The economics of conflict, 3 vols. Cheltenham: Edward Elgar.Google Scholar
  21. Sandler, T., and K. Hartley, eds. 2007. Handbook of defence economics. Vol. 2. Amsterdam: North-Holland.Google Scholar
  22. Schelling, T. 1966. Arms and influence. New Haven: Yale University Press.Google Scholar
  23. SIPRI (Stockholm International Peace Research Institute). 2005. SIPRI yearbook 2005. Oxford: Oxford University Press.Google Scholar
  24. US DoS (US Department of State). 2002. World military expenditures and arms transfers, 1999–2000. Washington, DC: Bureau of Verification and Compliance, US Department of State.Google Scholar
  25. Vahabi, M. 2004. The political economy of destructive power. Cheltenham: Edward Elgar.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Keith Hartley
    • 1
  • Martin C. McGuire
    • 1
  1. 1.