Modeling and Measuring the Effects of Economic Shocks on a Defense Industrial Base

Format:

Book

Author/Creator:

Roer, Elizabeth Hastings

Contributor:

Edenfield, Nathaniel

Johnson, Grant

Mckenna, Sean

Ohlandt, Chad J. R.

Thomas, Brent

Language:

English

Place of Publication:

RAND Corporation 2022

Summary:

Economic shocks are unanticipated changes in the conditions upon which resource allocation decisions are based. Economic shocks include a wide range of events, from typhoons to trade policy changes to mergers and acquisitions-any event that causes a decisionmaker to reconsider such choices as what to buy or sell, how much work to do, what production technology to use, or what price to pay or charge. The concern underlying this report is the possibility that economic shocks could induce the same effects as classic kinetic supply interdiction efforts: the degradation of reliable military capability, diversion of resources from high-priority military initiatives, and imposition of costs. The purpose of this report is to assist Department of Defense (DoD) decisionmakers called upon to respond to adverse economic shocks by identifying opportunities for improving analysis of shocks and their effects on U.S. defense postures. The authors examined historical and hypothetical instances in which shocks threatened or would threaten defense postures to identify questions that an analytic capability might be able to answer. They also reviewed data analysis methods used in the economics literature on shocks. Research findings suggest that DoD might benefit from improving its capability to analyze shocks. Moreover, although existing methods from economics provide insights necessary for achieving the desired analytic capability, they are not sufficient for fully providing that capability. Novel techniques employing multidisciplinary approaches appear best suited to help close gaps between existing and desired analytic capability, but additional research is needed to develop and refine such techniques.