THE ‘PRICE’ OF TERRORISM

Security measures are said to increase the price of terrorism. This price has not been hitherto defined in an economically meaningful way. This paper provides a precise definition by treating the terrorists’ resource endowment as a parcel of contingent claims to political influence with a price equal to the summed value of those contingent claims in potential states of the world. Equipped with this definition, an equilibrium model of the price of terrorism is deployed. Important insights are gained into the effect of terrorists’ risk aversion at the level of the price of terrorism in different states of the world and the theoretical conclusion is reached that higher security is associated with a lower price of terrorism rather than a higher price. The implications for policy are discussed.     

MODELS OF MILITARY EXPENDITURE AND GROWTH: A CRITICAL REVIEW

This paper reviews some of the theoretical and econometric issues involved in estimating growth models that include military spending. While the mainstream growth literature has not found military expenditure to be a significant determinant of growth, much of the defence economics literature has found significant effects. The paper argues that this is largely the product of the particular specification, the Feder–Ram model, that has been used in the defence economics literature but not in the mainstream literature. The paper critically evaluates this model, detailing its problems and limitations and suggests that it should be avoided. It also critically evaluates two alternative theoretical approaches, the Augmented Solow and the Barro models, suggesting that they provide a more promising avenue for future research. It concludes with some general comments about modelling the links between military expenditure and growth.     

ANALYSING THE DETERMINANTS OF TERRORISM IN TURKEY USING GEOGRAPHICALLY WEIGHTED REGRESSION

This paper investigates the determinants of provincial terrorism in Turkey taking spatial dimension into account for the time period 1990–2006. Following a traditional global regression analysis, spatial variations in the relationships are examined with geographically weighted regression (GWR) to obtain locally different parameter estimates. Empirical results indicate that increases in income and schooling ratio tend to reduce the provincial average level of terrorism, whereas an increase in unemployment enhances it. Moreover, GWR results indicate that the provincial effects of per capita income and education are more pronounced for the Eastern and South Eastern provinces compared to the Western provinces.     

SLOWING DOWN TO KEEP THE LEAD IN MILITARY TECHNOLOGY

We develop a model of military technology competition among states. States can choose to introduce new military technology, mimic rivals’ level of technology, or withdraw from the contest. States can choose to implement any level of technology within their current feasible technologies. We find that states with significant technological leads should sometimes withhold new technologies, only strategically releasing them to trump rivals’ efforts. We develop the model by refining Admiral Jackie Fisher’s roughly articulated concept of ‘plunging’. We then use this refined argument to reanalyze the case of naval rivalries among European powers between the Crimean War and the First World War. Finally, we conclude by discussing the model’s implications for current US military force structure planning.     

Corporate performance and military production in South Africa

With the end of the Cold War and apartheid, a process of demilitarisation and dramatic cuts in military spending has marked the transition to democracy in South Africa. Between 1989 and 1997 the South African defence budget was cut by more than 50% in real terms, with most of the cuts coming from the procurement budget, which was cut by nearly 70% in real terms during the same period. These cuts have had a significant impact on the country's defence industrial base. However, there has been surprisingly little research on the changes to defence companies that have taken place since the late 1980s. This paper makes a start at rectifying that deficiency by providing an analysis of the restructuring of the major defence‐dependent companies over the period 1988–97. It uses a number of financial ratios and other measures of corporate performance to compare their experience with non‐defence companies in the rest of the South African economy during the same period.     

Defence research and development: Encouraging private venture R&D with ‘option’ strategies*

Central to the changes in UK Ministry of Defence procurement policies over recent years has been the attempt to shift risk out of the public sector. In the context of research and development this has taken the form of encouraging private venture investment, so‐called PVR&D. Recognising that the scope for PVR&D is necessarily constrained by excessive risk and imperfect information, this paper explores the possible use of Option contracts as a means of expanding the opportunities for private venture funding.     

Military Expenditure,Endogeneity and Economic Growth

Abstract

While not always a concern for the general economic growth literature, the debate over the effects of military spending on growth continues to develop, with no consensus, but a deepening understanding of the limitations of previous work. One important issue that has not been adequately dealt with is the endogeneity of military spending in the growth equation, mainly because of the difficulty of finding any variables that would make adequate instruments. This paper considers this issue, using an endogenous growth model estimated on a large sample of 109 non-high-income countries for the period 1998–2012. The empirical analysis is framed within an instrumental variable setting that exploits the increase in military spending that occurs when unrest in a country escalates to turmoil. The estimation results show that endogeneity arising from reverse causality is a crucial issue, with the instrumental variable estimates providing a larger significant negative effect of military spending on growth than OLS would. This result is found to be robust to different sources of heterogeneity and different time periods.     

State fragility and violent uprisings in Nigeria

Abstract

The emergence of the Islamic sect, Boko Haram, and its transformation into a terrorist organisation has dominated recent discourse in the fields of political science and security studies, both within and without the socio-politico enclave known as Nigeria. Much of the discussion has centred on the extra-judicial execution of its founder, Mohammed Yusuf, which purportedly intensified the radicalisation of the group, and whether or not the sect receives operational and/or financial support from foreign terrorist associations. The interest of others has been to forecast the possibility of the internationalisation of the group's activities. This paper aligns with those whose interest is to identify and proffer ways of resolving factors that predisposed the Nigerian state to the levels of violence perpetrated by Boko Haram, with a view to averting much greater crises in the future. It adopts some historicism in demonstrating that the responsibility for the deepening insecurity in the country resides in the Nigerian state structure, which has often been seen as willing to sacrifice the well-being of the many for the benefit of a few. On the whole, the paper utilises state fragility as the framework of analysis by identifying the incapacity of the state in effective service delivery, which has as a result created a situation of mass unemployment and extreme poverty that has fanned the Boko Haram uprising. It concludes that a sustainable solution to the crisis lies in addressing the root causes of inequality, unemployment and poverty, with which most Nigerians, particularly in the north, subsist.     

U.S. policy on preventive war and preemption

In the aftermath of September 11, 2001 and Hurricane Katrina, the United States government has spent tens of billions of dollars to improve the nation's ability to respond to a natural disaster or terrorist attack, but the emphasis on immediate first response has left many long-term environmental, political, and technological challenges unaddressed. Although a dirty bomb attack is unlikely to yield the same amount of physical devastation and death as caused by Katrina or a nuclear weapon, the social, psychological, and economic impact would be enormous. At present, however, the United States lacks the technology necessary to decontaminate a large, densely populated urban area under time, political, and economic constraints. This article reviews past cleanup experiences and current decontamination capabilities to consider the long-term implications of a dirty bomb, identifies weaknesses in America's existing response capabilities, notes possible areas of political friction, and considers the implications of the failure to adequately prepare. Having the appropriate decontamination techniques established and long-term plans in place before an incident occurs will significantly improve the government's ability to protect public and environmental security, establish a viable decontamination strategy, allow residents to return to their homes, and get the local economy back on its feet.