The Economics of Arms

Keith Hartley

£60.00  |  $80.00
ISBN 9781911116233
£17.00  |  $25.00
ISBN 9781911116240
£17.00  |  $25.00
ISBN 9781911116257
216 pages   |  210 x 148mm   |  27 July 2017


". . . provides a concise description of the economics of the global weapons industry. Hartley is a pioneer in the subject of defense economics. He demonstrates impressive command of the statistical, institutional, and historical details of this complex industry. . . . Hartley applies industrial organization theory, game theory, public choice analysis, and the economics of technological change to the rich subject matter. The book is suitable for upper-level undergraduates looking for source material to inform a research paper, and as a reference for graduate students and faculty in economics or political science who specialize in defense studies. Essential." – Choice Reviews


It is estimated that today some 2.7% of world GDP ($1.5 trillion) is spent on arms. In 2014 Lockheed Martin, the US defence contractor, had revenues of $45 billion – the equivalent of the GDP of Tunisia. This book explores the business behind these breathtaking figures and explains how the arms industry makes its money.

The book begins by defining the industry, explaining why the sector is important, outlining its prime contractors and key supply chains. Its cost categories (from R&D to maintenance), the role of technical innovation, and the sector’s dependence on the monopsony buying power of Government, are all examined. The structure-conduct and performance model is used to show the workings of the arms market and its various entry and exit conditions, and the sector’s performance is analysed through various indicators including exports, development time scales, cost overruns and profitability. The complex choice problems of domestic procurement are considered alongside sales to foreign governments and the opportunities that may present for bribery and corruption.

The Military-Industrial-Political-Complex (MIPC) is unpacked and the behaviour of its major agents – national defence agencies, the armed forces, producer groups, political agents (voters, political parties and budget-maximising bureaucracies) – is scrutinised, both in times of conflict (expansion) and peace (contraction). The book concludes by considering future trends, such as whether arms industries are better under state or private ownership, and how they can meet the challenge of new threats in different forms. The discussion throughout is anchored to case studies from all parts of the world, including Brazil, Korea, Japan, Russia as well as UK, US and Europe.

As an authoritative non-technical introduction to the economics of arms industries, it is suitable for students of business studies, politics, international relations, political economy, strategic and defence studies as well as for courses on microeconomics and industrial economics. As a masterly summation from one of the world’s leading defence economists, it will also be required reading for staff in defence ministries, procurement agencies, the armed forces and strategic studies think-tanks throughout the world.


1. The Importance of Arms Industries
2. The Facts
3. The Economics
4. The Importance of Government
5. Arms Industries: Structure and Conduct
6. Arms Industries: Performance
7. Buying Arms
8. The Military-Industrial-Political Complex
9. Disarmament, Conversion and Peace
10. The Future of Arms Industries

Author Information

Keith Hartley is Emeritus Professor of Economics at the University of York. He was founding Editor of the journal Defence and Peace Economics and has, over the past 30 years, been a regular consultant on defence matters to the UK Government, United Nations, European Defence Agency, and the US Department of Defense, as well as to various arms companies, including BAE Systems. He is one of the world’s leading defence economists having written over 500 articles, publications and reports, including over a dozen books.

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