The value of military intelligence

This study evaluates the role of military intelligence in an arms race between two countries. The intelligence apparatus of each country evaluates the rival's capabilities and intentions, and enhances its military capability by increasing the effectiveness of its own weapon systems and reducing the effectiveness of the rival's weapon systems. Intelligence superiority also yields an advantage in deterrence and preemption. This study shows the following. (a) Investment in intelligence is much less beneficial for small government budgets, low intelligence efficiency, and a low degree of conservatism on the part of the policy-maker. (b) The expenditure on intelligence increases when intelligence efficiency is low and rising, and decreases when intelligence efficiency is high and rising. (c) Being very conservative may be costly to the country. (d) High-quality human capital substantially improves the country's security and welfare, particularly when the rivals are engaged in a knowledge race in addition to the usual arms race. An application of the model to the Israeli-Syrian arms race demonstrates its validity and usefulness.