Unique Transaction Costs in Defense Market(s): the Explanatory Power of New Institutional Economics

Abstract

Concerns about the US Military-Industrial complex have seemed a permanent fixture in the DoD. Initial studies outlined the uniqueness of the market, but continued utilization of classic economic approach continues with little explanatory power. This paper offers an alternative approach using transaction-costs analysis and the explanatory power of the New Institutional Economic and Public Choice School. The approach provides explanatory power in the defense markets'' mix of the invisible and visible hands at work and provides a framework for assessing viable policy alternatives that could provide increased efficiency while maintaining our principles of freedom.