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Defense R&D In The Anti-Terrorist Era

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  • Manuel Trajtenberg

Abstract

This paper analyzes the terrorist threat following 9/11, and explores its implications for defense R&D. First, it reviews the composition of defense R&D since 9/11: big weapon systems still command 30% of defense R&D spending (legacy of the Cold War), vis-a-vis just about 13% for intelligence and anti-terrorism. The second part examines the nature of the terrorist threat, and develops a simple model of terrorism, cast in a nested discrete choice framework. Two strategies are considered: fighting terrorism at its source, and protecting individual targets, which entails a negative externality. Intelligence emerges as the key aspect of the war against terrorism and, accordingly, R&D aimed at enhancing intelligence capabilities is viewed as the cornerstone of defense R&D.

Suggested Citation

  • Manuel Trajtenberg, 2006. "Defense R&D In The Anti-Terrorist Era," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(3), pages 177-199.
  • Handle: RePEc:taf:defpea:v:17:y:2006:i:3:p:177-199 DOI: 10.1080/10242690600645076
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    References listed on IDEAS

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    1. Manuel Trajtenberg, 2004. "Crafting Defense R&D Policy in the Anti-Terrorist Era," NBER Chapters,in: Innovation Policy and the Economy, Volume 4, pages 1-34 National Bureau of Economic Research, Inc.
    2. Cowan, Robin & Foray, Dominique, 1995. "Quandaries in the economics of dual technologies and spillovers from military to civilian research and development," Research Policy, Elsevier, pages 851-868.
    3. B. Peter Rosendorff & Todd Sandler, 2005. "The Political Economy of Transnational Terrorism," Journal of Conflict Resolution, Peace Science Society (International), pages 171-182.
    4. Kobi Kagan & Asher Tishler & Avi Weiss, 2005. "On The Use Of Terror Weapons Versus Modern Weapon Systems In An Arms Race Between Developed And Less Developed Countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(5), pages 331-346.
    5. Lichtenberg, Frank R., 1995. "Economics of defense R&D," Handbook of Defense Economics,in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 15, pages 431-457 Elsevier.
    6. Enders, Walter & Sandler, Todd, 1995. "Terrorism: Theory and applications," Handbook of Defense Economics,in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 9, pages 213-249 Elsevier.
    7. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters,in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
    8. Ian Ayres & Steven D. Levitt, 1998. "Measuring Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 43-77.
    9. Molas-Gallart, Jordi, 1997. "Which way to go? Defence technology and the diversity of 'dual-use' technology transfer," Research Policy, Elsevier, pages 367-385.
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    Cited by:

    1. Berman, Eli & Laitin, David D., 2008. "Religion, terrorism and public goods: Testing the club model," Journal of Public Economics, Elsevier, pages 1942-1967.
    2. Kjell Hausken & Jun Zhuang, 2011. "Governments' and Terrorists' Defense and Attack in a T -Period Game," Decision Analysis, INFORMS, pages 46-70.
    3. Berman, Eli & Laitin, David D., 2008. "Religion, terrorism and public goods: Testing the club model," Journal of Public Economics, Elsevier, pages 1942-1967.

    More about this item

    Keywords

    Terrorism; Defense R&D; Public goods; Intelligence; Dual-use;

    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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