Castles, Battles, and Bombs: How Economics Explains Military History

castles, battles, & bombs

Also by Jurgen Brauer Economic Issues of Disarmament: Contributions from Peace Economics and Peace Science. With Manas Chatterji. London: Macmillan and New York: New York University Press, 1993. Public Economics III: Public Choice, Political Economy, Peace and War. With Ronald Friesen and Edward Tower. Chapel Hill, NC: Eno River Press, 1995. Economics of Conflict and Peace. With William Gissy. Burlington, VT: Avebury, 1997. The Economics of Regional Security: NATO, the Mediterranean, and Southern Africa. With Keith Hartley. Amsterdam: Harwood, 2000. Arming the South: The Economics of Military Expenditure, Arms Production, and Arms Trade in Developing Countries. With J. Paul Dunne. New York: Palgrave, 2002. Economics of Peace and Security. With Lucy L. Webster and James K. Galbraith. A volume in the Encyclopedia of Life Support Systems. Developed under the auspices of the United Nations Educational, Scientific, and Cultural Organization (UNESCO). Oxford, UK: EOLSS Publishers, 2003 (http: // www.eolss.net). Arms Trade and Economic Development: Theory, Policy, and Cases in Arms Trade Offsets. With J. Paul Dunne. London: Routledge, 2004.

Also by Hubert van Tuyll Feeding the Bear: American Aid to the Soviet Union, 1941–1945. Westport, CT: Greenwood Press, 1989. America’s Strategic Future: A Blueprint for National Survival in the New Millennium. Westport, CT: Greenwood Press, 1998. The Netherlands and World War I: Diplomacy, Espionage, and Survival. Boston, MA: Brill Academic Publishers, 2001.

j u r g e n brau e r and

h u be rt van t u y ll

how economics explains mil itary h ist o ry



the university of chicago press Chicago and London

Jurgen Brauer is professor of economics at Augusta State University. Hubert van Tuyll is professor of history at Augusta State University.

The University of Chicago Press, Chicago 60637 The University of Chicago Press, Ltd., London © 2008 by The University of Chicago All rights reserved. Published 2008 Printed in the United States of America 17 16 15 14 13 12 11 10 09 08 12345 isbn-13: 978-0-226-07163-3 (cloth) isbn-10: 0-226-07163-4 (cloth) Library of Congress Cataloging-in-Publication Data Brauer, Jurgen, 1957– Castles, battles, and bombs : how economics explains military history / Jurgen Brauer and Hubert van Tuyll. p. cm. Includes bibliographical references and index. isbn-13: 978-0-226-07163-3 (cloth : alk. paper) isbn-10: 0-226-07163-4 (cloth : alk. paper) 1. War—Economic aspects—History. 2. Military history. I. Van Tuyll, Hubert P. II. Title. hb195.b69 2008 355.02'73—dc22 2007031667 o The paper used in this publication meets the minimum requirements of the American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ansi z39.48-1992.

To Leon —j b

and to Laura —h v t

contents

List of Figures and Tables xi Preface xiii

 o ne 

Economics 1 Economics 6 Principle I: Opportunity Cost 11 Principle II: Expected Marginal Costs and Benefits 15 Principle III: Substitution 20 Principle IV: Diminishing Marginal Returns 24 Principle V: Asymmetric Information and Hidden Characteristics 27 Principle VI: Hidden Actions and Incentive Alignments 33 Conclusion: Economics—and Military History 39

 two 

The High Middle Ages, 1000–1300 The Case of the Medieval Castle and the Opportunity Cost of Warfare 45 Opportunity Cost and Warfare 49 The Ubiquity of Castles 51 The Cost of Castling 53 The Advantages of Castles 59 The Cost of Armies 66 Castle Building and the Other Principles of Economics 72 Conclusion 76

 three 

The Renaissance, 1300–1600 The Case of the Condottieri and the Military Labor Market 80 The Principal-Agent Problem 83 Demand, Supply, and Recruitment 85 Contracts and Pay 89 Control and Contract Evolution 100 The Development of Permanent Armies 104 Condottieri and the Other Principles of Economics 114 Conclusion 117

 fo ur 

The Age of Battle, 1618–1815 The Case of Costs, Benefits, and the Decision to Offer Battle 119 Expected Marginal Costs and Benefits of Battle 122 The 1600s: Gustavus Adolphus and Raimondo de Montecuccoli 127 The 1700s: Marlborough, de Saxe, and Frederick the Great 137 Napoleonic Warfare 147 The Age of Battle and the Other Principles of Economics 154 Conclusion 157

 fi ve 

The Age of Revolution, 1789–1914 The Case of the American Civil War and the Economics of Information Asymmetry 159 Information and Warfare 163 North, South, and the Search for Information 165 Major Eastern Campaigns through Gettysburg 168 Grant in Virginia 181 The American Civil War and the Other Principles of Economics 190 Conclusion 194

six

The Age of the World Wars, 1914–1945 The Case of Diminishing Marginal Returns to the Strategic Bombing of Germany in World War II 197 A Strategic Bombing Production Function 201 Bombing German War Production 207 Bombing the Supply Chain and the Civilian Economy 213 Bombing German Morale 219

Assessing the Effect of Strategic Bombing 224 Strategic Bombing and the Other Principles of Economics 227 Conclusion 235

 s even 

The Age of the Cold War, 1945–1991 The Case of Capital-Labor Substitution and France’s Force de Frappe 244 History of the Force de Frappe 248 The Force Post–De Gaulle 257 Justifying the Force 260 The Force’s Effect on France’s Conventional Arms 267 Substituting Nuclear for Conventional Forces 272 The Force de Frappe and the Other Principles of Economics 282 Conclusion 285

 ei g ht 

Economics and Military History in the Twenty-first Century 287 Economics of Terrorism 289 Economics of Military Manpower 298 Economics of Private Military Companies 307 Economics, Historiography, and Military History 319 Conclusion 322

Notes 329 References 367 Index 387

figures and tables

figures 1.1. Production functions

25

2.1. Edwardian castle design

56

3.1. Italy, ca. 1494

82

4.1. Location of battles discussed

121

4.2. The Thirty Years’ War

133

4.3. Battle of Lützen

135

4.4. Battle of Blenheim

143

4.5. The Seven Years’ War

145

4.6. Size of field armies

149

5.1. The War in the East

161

5.2. Virginia geography

162

5.3. The Peninsula Campaign, Virginia, 1862

171

5.4. Grant’s advance, 1864

182

6.1. RAF bombing tonnage dropped on German industrial areas

198

6.2. Strategic bombing production functions

202

6.3. Monthly index of actual and potential German arms production

209

6.4. German loss of aircraft production

211

6.5. RAF / USAAF bombing of Germany, 1939–1945

218

6.6. Diminishing returns of Allied strategic bombing on German people’s morale

223

8.1. Goods space

309

ta b l es 1.1. A matrix on the economics of military history

40

2.1. Cost of castle building

54

2.2. Edward I’s campaign spending

69

3.1. Foreigners in eighteenth-century armies

117

4.1. Monarchies’ military expenditure

139

f i g ures a nd ta bles [ xii ] 4.2. Cost of major British wars, 1689–1815

140

5.1. Major eastern campaigns in the American Civil War

169

6.1. Tonnage dropped on German aircraft production sites

210

6.2. Tonnage dropped on German chemical industry

212

6.3. Effects of bomb tonnage dropped on German railroad and fuel industry

216

6.4. Home destruction and morale

224

7.1. French military characteristics, 1946–1995

261

7.2. Substitution and the force de frappe

274

8.1. Attributes of terror organizations and target governments

295

preface

Many readers will pick up this book for its military history, not for its economics. They may well be tempted to skip straight to a particular history of interest to them: the cost of castle building in the High Middle Ages, the nature and role of the condottieri, or private military contractors, of the Italian city-states in the Renaissance, generals’ battle-related decision making in the Enlightenment years, “information warfare” in the American Civil War, the strategic bombing of Germany in World War II, or France’s decision to develop atomic weaponry during the early Cold War years. To accommodate such readers, we have written these chapters in a reasonably self-contained and self-explanatory fashion, but an eventual reading of the economics chapter (chapter 1) should not be avoided. If first you must succumb to your appetite for history, then read the economics as soon thereafter as you dare—you may find it a surprisingly delectable dessert. Castles, Battles, and Bombs is our attempt to write military history from the viewpoint of economic theory. By way of illustration, we study six cases. To provide scope, they span the past thousand years, the second millennium AD, that is. Five cases concern Europe, and one North America. We should have liked to expand coverage, to go farther afield and further back in time, but for a variety of reasons this seemed too ambitious. Even the cases we have chosen might strike some readers as just off the mark. For example, when one considers the Cold War period (1945–1991), what leaps to mind is the conflict between the former Soviet Union and the United States, not how France came to acquire its atomic arsenal. But what makes the case so fascinating, not just for France but for history, is that France’s entry into the nuclear age changed the dynamics of the superpower clash. Before France, the United Kingdom had already acquired an atomic weapons capability, but it—then as now—was too closely aligned with the United States to be considered a fully independent player on the world stage. In contrast, France’s aspiration to recover grandeur—then as

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now—threw the already dangerous nuclear game into confusion. Instead of a one-on-one Bobby Fischer versus Boris Spassky–type chess match, a third player moved pieces across the board, irking the Americans while offering no solace to the Soviets. With a multitude of states clamoring today to build, expand, and wield atomic arsenals of their own, a reexamination of what spirit animated the French in the 1950s and 1960s seems not tangential at all. What captures the economist’s interest in this is the simple observation that conventional, nonnuclear forces were costing France, and everybody else, a pretty penny. To get on with the business of daily living, might France’s reason to build its force de frappe have simply been that it would be cheaper to substitute atomic for conventional forces and recapture, if not global then European, stature in the bargain? Chapter 7 addresses this very question. Stepping back in time, much history has been written on the Age of the World Wars (1914–1945). There is even some economic history of these calamities.1 Much of this addresses the “economics of war,” items such as the financing of war, the material resources required, acquired, and consumed, the economic impact and consequences at home and abroad, and the conversion of economies from civilian to military pursuits, in a word just the sort of issues one might expect economists competently to handle. But economics can reach further, into the operational territory of the very conduct of war. By way of illustration, we pick, in chapter 6, one dramatic instance, moreover one that would change the very conception of modern war: the strategic bombing of Germany in World War II. The press the effort received, certainly within the armed forces, was responsible for undertaking similar efforts in virtually every U.S.-led war since. Without question, the thousand-bomber raids flown over German cities were spectacular applications of brute force, but were they efficacious? That war planners might have done well to respect the economic idea of diminishing returns for the effort introduces a note of caution. Any student studying into the wee hours of the night knows that, although the effort may help to pass an upcoming exam, merely putting in more hours will not commensurately increase the exam score. As the saying goes, what counts are not the hours one puts in but what one puts in the hours. The same holds for bombing: merely throwing more bombers at Berlin might win the war but perhaps only at increasing and excruciating cost to Allied forces. Had the economic notion of diminishing returns been fully appreciated, the Allies might have pursued technological innovation in the European air war with even more urgency than in fact they did. They also might have saved countless lives, for no branch of the armed services suffered more losses, in proportion to its members, than did the air crews, and no conflagration was more

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searing than the firestorms the bombers seeded. If fight we must, one wonders what other simple economic concepts might have lessened loss of life. The choice of the American Civil War as chapter 5’s case study to illuminate the Age of Revolution (1789–1914) is dictated by the most important revolution of all: the industrial revolution. While the French Revolution revolutionized warfare, industrialization was not yet sufficiently advanced to much affect its conduct and outcome. In contrast, the American Civil War was the first major war fought in an industrial context. This brought, for example, new technology and, more significantly, mass production to the battlefield. In terms of information flows, three developments of the age were particularly notable. These were the telegraph, the railroad, and the newspaper. No one today needs to be convinced of the relevance of the introduction of electronic communication, which is what the telegraph represented. But because people could travel farther and faster than before, the railroad also moved information. And the newspaper, a product of improved printing and greater literacy, was used as a tool by both sides as well, as a source of information and as a way of circulating disinformation. Marrying aspects of the economics of information to the role of information in warfare is a relatively novel enterprise, certainly for the case of the American Civil War. In military history the period 1618–1815 is sometimes referred to as the Age of Battle. This governed choosing a case closely tied to some aspect of battle. The feature we chose to examine in chapter 4 looks at commanders’ decision making, namely, the decision to offer or decline battle, especially as decision making is a prominent feature of the economic analysis of behavior. The taking of this decision was a markedly prominent affair during the entire period and affected every significant campaign. Recognizing that battle was not a random event but flowed from a much deliberated choice, virtually every “great captain” of the age considered the decision to offer battle as requiring important, perhaps the most important, attention. Once battle was joined, the set of feasible remaining choices narrowed drastically, and generals’ control of the situation could rapidly deteriorate. This was especially true of long battles when the opposing armies might degenerate into brawling, homicidal mobs. Battle offered the greatest possible reward—victory—but it also imposed the ultimate price: death to the soldier and loss of one’s army to the enemy general. Better to offer battle with much forethought. The employment of tens of thousands of private military contractors in the current wars in Afghanistan and Iraq has brought some public attention to the issue of how to supplement a state’s “official” armed forces. The issue is not new to experts in the field. The wars in the former Yugoslavia in the

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1990s already made much use of private military and private security companies, as did various states and factions in the numerous African wars in the same decade. Romantic notions still swirl around the “mercenaries” of the famed French Foreign Legion, and American readers at least will have heard about the role of “the Hessians” in the Revolutionary War of secession from Great Britain. Indeed, once one comes to think of it, purely public forces, fully staffed by conscripting a state’s young male subjects, are an anomaly in history. In spite of the derisive “mercenary” and “soldier of fortune” labels, voluntary supply and demand in the military labor market have always been lively, and it is surprising that relatively little has been written about this market from an economic perspective. In one legendary instance, for example, historians generally ascribe the decline in the widespread employment of military contractors in the Italian Renaissance (1300–1600)—the condottieri so famously maligned by Machiavelli—to changing political fortunes of their employers and to certain developments in military technology. These were important changes indeed, but why not also consider, as we do in chapter 3, the nature of the very contracts (condotte) after whom the contractors, the condottieri, are named? The resurgence of private military contractors today demonstrates that this is a hugely important aspect of the trade to study. Perhaps the market for force can be organized very differently than entrenched habits of thought and practice suggest.2 Among the more obvious potential cases for the study of military behavior in the High Middle Ages (1000–1300) are the construction and use of castles, campaigns of conquest, the evolution of weaponry, war planning, the training of the individual knight, the development of the medieval army, and battle tactics. Of these, the castle towers above all. Its construction, defense, and besiegement dominated war in this era, and the increasingly positive view which historians now have of the medieval army only increases the castle’s significance. Reliance on fortification seemed natural when we thought that the armies of the day were mere rabbles. But that armies turn out to be far better organized and led than previously believed makes the reliance on castles all the more interesting. The most important changes in weaponry were those which made assaults on castles possible. While battles mattered, army commanders more often than not avoided fighting, concentrating more on maneuvers designed to approach or defend castles. Yet even Europe’s best knight, mounted on its best horse, carrying the best lance, and possessed of the best available armor, could not in person assault Europe’s worst castle. Chapter 2, on the castle, thus complements the resurgence of historical interest in medieval armies. As we will see, in spite of the enormous amount spent on castles—on occasion, a

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king would lavish a whole year’s revenue on a single castle—it was money well spent. Unexpectedly, a bit of economics might tell us just why this was so. We do not presume that readers are familiar with economics and therefore set out, in chapter 1, to explain some of its principles. Curiously, no agreement exists on just what are the principles of economics, but no economist would dispute the six we discuss: first, the idea that in order to do one thing one must generally sacrifice the opportunity of doing another thing at the same time; second, the notion that incentives affect behavior; third, that decisions are made by comparing the extra benefits to be had against the extra costs incurred; fourth, that unequal information creates power favoring one party over another; fifth, the principle that, beyond some point, further applications of an input result in ever smaller yields of additional output; and sixth, the idea that people will substitute a relatively cheaper for a relatively more expensive item if the items are deemed comparable. (Apples and oranges can be compared, if all one wants is a piece of fruit.) These principles are (almost) self-evident, but their subtleties and implications are not, and it is part of our purpose to illustrate how these principles played out in the episodes of military history we have selected for review in this book. In spite of significant advances in historiography since the 1960s, historical scholarship lacks generally accepted theoretical foundations. By what criteria does one select, order, and render the facts of history, and what events exactly would a theory of history predict, and predict in a way that is empirically testable and open to refutation? Historians in the United States are especially skeptical of theory. Referring to Hans-Georg Gadamer and Wilhelm Dilthey, Bruce Mazlish writes that “in general . . . historians, suspicious of theory from on high, go about their business while ignoring such arcane thinkers.”3 In this respect, military historians are no different. Even so, one way to illuminate history is to supply theory from other fields of study, such as sociology, psychology, political science, or indeed economics, or even geography, climatology, and other natural sciences, as, for instance, two recent and immensely popular books by Jared Diamond have done.4 In these and other academic disciplines theory is more developed than it is in the realm of history. With the help of these fields of study, history might be viewed as a series of case studies in applied theory. Although the record is not bad, economics itself is not of course a body of impeccably successful theory. We ask the reader to relax and have some fun. Even if one harbors misgivings about economics, one may nonetheless enjoy what can be done with it.5 We should state clearly that while the book is written with the generalinterest reader foremost in mind, each of the substantive chapters nonetheless

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makes a genuine contribution to the development of scholarly knowledge. For example, regarding the chapter on the condottieri, historical scholarship focuses on the complex politics and developing military technology of the time, to the neglect of the labor contracts after whom the condottieri are named. Drawing attention to these contracts, albeit from an economic viewpoint, marks a new contribution to that literature. Likewise, the chapter on Germany in World War II makes its own scholarly offering to the debate on the efficacy of strategic bombing that still engages historians today. And as much as has been written about the American Civil War—books alone number in the thousands—it is surprising how seldom that literature examines, as we do, the role of information in that war. Consequently, we ask the general-interest reader to overlook the copious chapter notes intended mostly for the scholar, just as we ask the scholar to bear with us when for the general reader’s benefit we lay out a topic or period more broadly than the scholar might ordinarily find appropriate. How representative are our six cases of the larger enterprise of infusing military history with economics? We do not yet know. We do know that by selecting six economic principles, rather than just one or two, and applying them to six distinct historical epochs stretched across one thousand years of history, a time period that is ambitious to cover, we have spread the dragnet widely. In our view, the results if not representative are at least encouraging: economics would seem to offer a fruitful way to (re)examine military history per se.

F

or comments on various portions of the book we thank Professors Jeremy Black, Mark Fissel, Jay Pilzer, Wendy Turner—historians all—and economists at the Conference on Defense and Peace Economics, hosted at Rutgers University, Newark, NJ, May 2001 and those at the Fifth Annual Conference on Defense and Peace Economics, Middlesex University Business School, London, June 2001. We further thank anonymous internal and external reviewers at the University of Chicago Press, its then-editor J. Alex Schwartz, its current editor David Pervin, and all their colleagues at the Press. We also thank Mr. Matthias Spoerle, Mr. Sertac Kargi, Mr. Nicholas Anglewicz, Mr. Milos Nikolic, and the Inter-Library Loan service personnel at Augusta State University for excellent research assistance. Capt. Joseph Guido provided highly useful comments on an early draft of the entire manuscript. For assistance with chapter 3 we thank Ms. Nadja A. Weber-Guido, Professor Kristin Casaletto, and Professor Duncan Robertson (translations) as well as Professors Stephan Selzer and William Caferro (correspondence). We also thank Debra van Tuyll (illustrations). The usual disclaimer applies: any remaining errors are ours.

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A special thank you is due to Professors Peter Hall and Stefan Markowski and to all of their colleagues at the University of New South Wales campus at the Australian Defence Force Academy in Canberra, Australia. They provided one of us with a most hospitable, stimulating, and productive environment during a visiting professorship there in 2005 that substantially advanced the completion of this book. Finally, various prepublication readers asked why we did not include a chapter on the current United States wars in Afghanistan and, especially, Iraq. Perhaps the most succinct answer is that, in contrast to the cases we use, the final data set does not yet exist. Yet if the point of economics is not just to explain but also to predict, does not the premise of our project—the injection of theory into history—demand that we be able to forecast the chronicles of the future? Whereas the psychohistorians of Isaac Asimov’s science fiction achieved this feat, it would as yet be asking too much of the enterprise as others, from Marx to Tolstoy, have found out before us.6 Let us first see whether theory, economic or otherwise, makes a useful contribution to explaining the past before we try our hand at the future again. Meanwhile, suffice it to say that while there is much to note about the economic aspects of the ongoing U.S. wars—from the economics of terrorism to the role of failed states, the rise of nonconventional forces, the formation of alliances, and the massive use of private military companies—our plans for this book were already well laid when the World Trade Center’s twin towers fell in 2001. We nonetheless conclude the book, in chapter 8, with sections on the economics of terrorism, the economics of military manpower, and the increasing use by governments of private military and security companies. It may be seen, we believe, that economics well applies not only to military history but to contemporary military engagements.

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