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« Economists Used to Believe This | Main | Coverage of my ASI Talk in The Spectator »

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Just a quick read, but once again I admire how Chris integrates foreign policy and defense analysis with Austrian economics. In my 4 years at Heritage, I was lodged in the Foreign Policy department. I understand how difficult his task is.

A question to Chris: Is not the moral hazard and adverse-selection problems you identify one-and-the same principal/agent problem? It struck me as such.

Chris, you might find Joel Baum and Anita McGahan's work on private military companies useful, e.g.:

http://ssrn.com/abstract=1496498

Jerry,
Thanks for the kind words.

Regarding the adverse selection and moral hazard problems – I view the former as being an ex ante problem and the latter being an ex post problem. In the context I am writing, the adverse selection problem is that proponents of foreign interventions will tend to (ex ante) overstate the net benefits of the interventions. Principals know this and therefore will dedicate less than the optimal amount of resources necessary to accomplish the task. After resources have been committed (ex post) those that control the resources will have an incentive to shirk due to imperfect monitoring.

Upon rereading the paper, I need to go back and make this clear. Thanks for raising this point.

Peter,
Thank you for bringing the Baum and McGahan paper to my attention. It looks very relevant.

Chris

I too like the way Chris marries foreign policy analysis to Austrian econ.

Better than all that pirate crap.

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