Empirical Public Economics
Edited by Attiat F. Ott and Richard J. Cebula
Chapter 10: Economics of Conflict
10 Economics of conﬂict Keith Hartley Introduction Conﬂict is usually the preserve of disciplines other than economics. Debates and decisions about war involve political, military, moral and legal judgements. But there is an economics dimension of conﬂict, namely, its costs. Wars are not costless: they can involve massive costs (for example the costs of World War II). Economics has also made further contributions in analysing the causes of conﬂict and in identifying potential economic targets during conﬂict (for example oil ﬁelds, aircraft factories and railways in World War II). Surprisingly, in view of the resource costs involved, there is not a massive economics literature studying World Wars I and II and other major conﬂicts since 1945 (for example Korea, Vietnam, Bosnia, Middle East, Iraq). Recent developments have focused on applying economic theory and modelling to conﬂict, including terrorism (for example rational choice models and game theory). These developments can help policy-makers understand the causes of different types of conﬂict and the role of policy solutions such as international agreements controlling arms races and arms exports, sanctions, deterrence and the contribution of international peace-keeping to preventing and resolving conﬂict. There remains a need for more empirical work on the economics of conﬂict. Much empirical work, including case studies of conﬂict, has been undertaken by scholars from other disciplines (for example history, political science, sociology). There is a surprising absence of applied economics studies of wars and conﬂicts. As a...
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