There’s been a lot of discussion recently about the challenges faced by Defense Secretary Leon Panetta as he works to manage the shrinking of the U.S. defense budget without severely compromising our nation’s security interests. One compelling strategy, however, has received relatively little attention: increasing the amount spent on cost-benefit research.
The Defense Department needs to cut the programs that don’t work and keep the ones that do. Unfortunately, it’s not entirely clear which programs don’t work. What’s more, there are not effective mechanisms in place to make those determinations. Many groups within DoD are dedicated to evaluating programs’ cost-effectiveness, and many of these agencies have large staffs of economists, engineers and operations researchers. However, in my experience, many of the researchers within the defense establishment are not given the independence or support necessary to ask hard questions or to publicize unpopular results.
What DoD needs are more “outside” cost-benefit analyses not conducted or influenced by the suppliers or the procuring organizations. Many organizations — both within DoD and in the private sector — could potentially conduct these analyses. Academic researchers could contribute substantially to this effort. Academic research is often the least costly option and could lead to high-quality objective assessments of important and expensive defense programs. But academic researchers can get involved only if they have access to data and can publish their findings.
Relative to the size of the defense budget, the amount of attention that academics pay to defense issues is minuscule. Defense-related spending totaled $1 trillion in fiscal 2011, or 16 percent of the total federal, state and local government budget. These numbers are comparable to the amounts spent on pensions ($1 trillion), health care ($1.1 trillion) and education ($0.9 trillion). And unlike entitlement programs such as Social Security and Medicaid, which primarily involve paying out previous obligations, the defense budget is largely discretionary, meaning that choices made today affect spending in the immediate future. Despite the economic importance of the topic, the most popular public finance textbooks include chapters on education, Social Security and health care, but none on defense. A search for “defense,” “military” or “national security” on the EconLit database of published economics articles produces 6,157 articles, less than one-sixth as many as the 39,820 that show up in a search for “education” or “school.”
One of the main obstacles to research in defense economics is access to data. Evaluating a current or recent defense program generally requires the use of restricted data. Unlike with education, pension or health care issues, there is no central clearinghouse for data sets on defense programs, and learning about what data are available requires navigating a maze of agencies and red tape. Additionally, to obtain these data (or detailed information about what data sets exist and what information they include), it is generally necessary to have a DoD sponsorship, a security clearance (at a cost of about $100,000) or both. The actual security risks vary from case to case, and some pieces of information are probably overclassified, but many of these data are restricted for legitimate reasons. Nevertheless, DoD could take much greater advantage of the free research services that academic economists are willing to provide by sponsoring investigator-initiated projects, providing security clearances and offering outreach and assistance in managing bureaucratic hurdles.
A second important obstacle is the culture of DoD. Agencies within DoD do not want to share their data, particularly if the resulting study might lead to cuts in their departments. As someone who has recently found some results that were critical of a large military expenditure program, I can verify that certain types of findings do not always receive the warmest reception within DoD. Quality research cannot thrive in an environment in which people who don’t like certain answers have the power to retaliate against them. In addition to needing assistance and access to data, academic economists are going to need advocates within DoD to ensure that honest answers are rewarded.
Budget cuts are going to happen at DoD, and they’re going to involve some big fights. In the interests of our nation’s security and financial well-being, I hope that DoD learns how to make these cuts in the right places. AFJ