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EC 4667 ECONOMICS of DEFENSE - LEVEL 6 UK CREDITS: 15 (Updated Spring 2015)

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EC 4667 ECONOMICS of DEFENSE - LEVEL 6 UK CREDITS: 15 (Updated Spring 2015) DEREE COLLEGE SYLLABUS FOR: EC 4667 ECONOMICS OF DEFENSE - LEVEL 6 UK CREDITS: 15 (Updated Spring 2015) PREREQUISITES: EC 1000 Principles of Microeconomics EC 1101 Principles of Macroeconomics EC 3270 Managerial Economics EC 3473 Selected Topics in Microeconomic Theory MA 1108 College Algebra MA 1105 Applied Calculus CATALOG DESCRIPTION: Fundamentals of defense economics; definition of terms and concepts; the demand for military expenditures; costs versus benefits of defense expenditure; the opportunity cost of defense; the peace dividend; defense procurement theories; evidence and policies; the Greek defense industry and the impact of the defense burden on the Greek balance of payments; arms race models; the arms race cost for Greece; military manpower. RATIONALE: Defense expenditure absorbs a considerable GDP share for a large number of countries, shifting resources away from alternative, nonmilitary activities. In the context of this trade-off between national security and higher growth rates, one needs to determine the appropriate balance between the two alternatives in the context of various national and international constraints. This course aims at describing the reasoning under which such choices must be made, as well as at investigating the extent to which domestic military production may lead to corresponding import substitution, considering the impact of such a policy on both the domestic and the foreign sectors of the economy. Finally, special reference to the above questions is made with respect to Greece. LEARNING OUTCOMES: As a result of taking this course, the student should be able to: 1. Name and describe the traditional models of defense expenditure and the cost-benefit analysis involved, as seen through the concept of the peace dividend. 2. Explain and analyze the impact on a nation's economy of an arms race. 3. Apply various cost-estimating techniques in the context of several forms of market structures. 4. Evaluate the importance of domestic defense industrial base and the ensuing import-substitution for the balance of payments. 5. Apply all of the above to Greece. METHOD OF TEACHING AND LEARNING: Classes consist of lectures, class discussions, problem-solving sessions. Office hours: students are encouraged to make full use of the office hours of their instructor, where they can ask questions and go over lecture material. Use of a blackboard site, where instructors post lecture notes, assignment instructions, timely announcements, as well as additional resources. 1 STUDENT EVALUATION: In-class, 1-hour, "diagnostic" test - formative 0 Essay type questions Research paper (2,000 words) - summative 40 Literature review/synthesis/critical evaluation Final examination (2-hour, comprehensive) - summative 60 Essay type questions The formative test aims to prepare students for the final examination. The research paper tests Learning Outcomes 1 through 5. The final examination tests Learning Outcomes 1 through 5. READING LIST: 1. Required Material : T. Sandler and K. Hartley, “Economics of Defence”, Cambridge U.P., 1995. 2. Further Reading : Readings to supplement the basic material covered in the textbook. Hartley, K. and T. Sandler. Handbook of Defense Economics, Elsevier, 2007. Hartley, K. and T. Sandler. The Political Economy of NATO”, Cambridge U. P., 1999. Hirschleifer J. “The Dark Side of the Force: Economic Foundation of the Conflict Theory”, Cambridge U.P. 2001. Camerer, C.F. “Behavioural GameTheory: Experiments in Strategic Interactions”, Princeton U.P. 2003. WWW SOURCES: www.iiss.org www.elesme.gr www.army.gr www.helenicnavy.gr www.haf.gr www.economist.com/countries/Greece www.economist.com/countries/Turkey www.defencenet.gr INDICATIVE CONTENT: 1. Theory 1.1 Definition of Economics of Defense 1.2 The Demand for Military Expenditures 1.3 Defense Procurement: Theory and Policy Issues 1.4 Cost-Benefit Analysis of Defense Expenditure 1.4.1 The Peace Dividend 1.4.2 Economic Growth – Defense Expenditure Model 1.5 Arms Race Models 1.6 Military Personnel and Domestic Security 2. Defense Industry 2.1 The World Market 2.2 Defense and the Industrial Base 2 2.2.1 Stages of Domestic Production 2.2.2 The Arms Trade 2.3 Countertrade and Defense Offset 3. The Case of Greece 3.1 Brief Overview of the Greek Case 3.1.1 Problems and Prospects 3.2 The Greek Contribution to NATO 3.3 The Arms Race Impact on the Greek Economy 3.4 The Greek Defense Industry 3.4.1 Domestic Production versus Imports 3.4.2 The Ensuing Balance–of–Payments and Debt Burden 3 .
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