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This Element introduces defence economics. It presents the recent history of the subject and its range of coverage. Traditional topics covered include models of arms races, alliances, procurement and contracting, personnel polices, industrial policies and disarmament. Newer areas covered include terrorism and the economics of war and conflict.

A century ago Frederick Lanchester formulated a mathematical model of combat which suggested that the combat power of a military force was proportional to the product of the individual effectiveness of the units in the force and the square of the number of units deployed. This model reinforced a long-established faith in the importance of superior numbers. However, successive historical studies failed to identify any clear relationship between the numbers and losses in opposing forces. This Element analyses American Civil War battles, and shows that the ratio of losses incurred was inversely proportional to the ratio of numbers effectively engaged. This result demonstrates that the numbers of fighting units in a military force are less important than the ability of those units to get into action and inflict losses on the enemy. This result demonstrates the limitations of the Square Law, and should prevent it from being applied indiscriminately.

This Element primarily focuses on interactions between government and industrial suppliers within the institutional peculiarities of the defence marketplace. This includes the developments that have determined the course of defence industry consolidation post-Cold War.

A foundational primer on the field of conflict and peace economics, this Element details its intellectual history, highlights policy-relevant insights gained from contemporary theory and evidence, and addresses future research needs.

In spite of their massive military expenditures, the Gulf monarchies remain unable to defend themselves. This Element takes a political economy approach and argues that structural factors inherent in the Gulf states' political systems prohibit civilian oversight of the defense sector and are responsible for this outcome.