Military Economics: defence choices for the UK

The Inaugural Ronald Tress Memorial Lecture by Professor Ron Smith

 This blog post was contributed by Betty Low, a Birkbeck alumna who graduated with a MSc Economics in 1975.

The last time I had seen Ron Smith he was a lecturer, it was in the old Gresse Street Building (don’t ask) and he had dark hair. Gresse Street is long gone and, well, my hair isn’t dark any more either.

I say this not to be glib, but to emphasise that Ron’s lecture was never going to be an ordinary economics lecture. The inaugural Ronald Tress Memorial Lecture was launched to commemorate the 40th anniversary of the establishment of the Birkbeck Economics Department by the eminent economist and one-time Master of Birkbeck.

So the audience that had gathered to listen to Professor Smith’s “Military Economics: defence choices for the UK” was understandably an eclectic cocktail of alumnae, old (such as myself) and new (such as my daughter), current students, fellow academics and a contingent from the Tress family. Like all good writing Ron’s words were accessible and meaningful on many different thought levels. He used the lecture to reflect on the past and the future and how looking back always helped one to understand how to look forward.

Ron overlaid MOD spending behaviour with a layer of rigour and structure to explain both to the knowledgeable and to the neophytes the context and consequences of military personnel making commercial decisions.

Procurement practice at the Ministry of Defence was affected by three biases of which observers should be aware: “optimism bias”, “certainty bias” and can-do bias”. The first results in habitual under-estimation of the cost of projects and by the time this is obvious, those involved have moved on so there is no accountability. The certainty bias is the habit of Whitehall to treat everything as more predictable than it in fact can ever be. The “can-do bias” is another word for misplaced confidence; not to accept what our military tells us is tantamount to not believing in motherhood and apple pie.

The biases seem to be well understood and accepted but inescapable.

This prompted a non-practising economics alumna such as myself to think, “If you were charged today with creating a system for defence procurement, would you recommend that which now exists?” No.

As if to answer the question Ron deftly compared the British experience with the French.  They were similar – both had difficulty in financing their strategic objectives and both let arms exports determine foreign policy – yet different – the French resisted reappraisal while the British had regular defence reviews in response to economic crises. It was scarce comfort to hear Ron point out that the British experience is no different from the American but that they just had more money to throw at the problem.

The defence community is not just the MOD officials. It is comprised of representatives of the armed services, politicians, civil servants, science and industry. To quote Professor Smith, “Each of these groups face incentives that generate outcomes that, while rational in terms of the objectives of each group, are severely dysfunctional for MOD as a whole.”

In the private sector measuring output is simple; it is the bottom right-hand corner. The public sector has different challenges. There are no easy measures of output. As Ron said, “A good result for the Ministry of Defence is no activity. Defence is like an insurance policy. If it works you deter and don’t need it at all.” Not an easy one to benchmark.

Those of us who work in the private sector often fail to grasp how challenging and different it is to work in an environment of conflicting and often illogical agenda. At the risk of sounding like Yes, Minister, it is important to remember that decision-making is being made in an atmosphere of constant, inherent tensions between bureaucrats and politicians and that the public sector does not celebrate innovation. Introducing any change in Whitehall is like turning around one of the MOD’s biggest submarines.

In introducing the Inaugural Ronald Tress Memorial Lecture Birkbeck College Master David Latchman had reminded us that the founder of the Economics Department had been “a sound bastion of common sense”. What successive generations of British defence planners sometimes lack, the erstwhile Master had in spades.

For it was Ronald Tress who almost 40 years ago appointed Ron Smith.


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