would push resources into storage to recover some diversification, thereby reducing goods available when the war breaks out.
Analyses of the management of wartime economies consist of a set of prescriptions for centralized market control with little consideration of how policies
fit into the objectives, technology, and strategy of a country engaged in war.
Our objective has been to construct a general equilibrium war-game model in
which particular war policies emerge in a Nash equilibrium. Specifically, we
have integrated a war model with an existing model of financial crisis to examine
the emergence of the use of financial weapons. We have found that financial
warfare in the form of an asset freeze or a counterfeiting attack will emerge as
an equilibrium outcome of a war game. In the narrow case represented by our
model, financial warfare, by precluding potential industrial projects, will reduce
the measured magnitude of the war, defined as the total amount of resources
converted to war goods. We have also found that a counterfeiting attack is more
damaging to war potential than an asset freeze.
Such books generally appear opportunistically in the second year of major wars.
A partial list includes Chandler and
Wallace ( 1951), Stein and
Backman ( 1942), Steiner
( 1942), Backman ( 1952), and Brown University Economists ( 1942). Though these books
serve as advice manuals for how to operate an economy in a major war, they present no
systematic analysis of why recommended policies are optimal in a general-equilibrium
Asset freezes, blocked accounts, war-zone-stamped money, occupation currency,
counterfeiting, and secret accounts comprise a collection of financial weapons employed
in major wars.
Verkerke ( 1986) have recently suggested that financial weapons might
be employed to spark a financial crisis in an enemy country.
This is in contrast to many authors in macroeconomics who treat war expenditure
as exogenous. For example, the riveting examples in Lucas and
Stokey ( 1983) concern
the exogenous outburst and magnitude of war. In many cases, assuming the exogeneity
of war is simply a theoretical convenience. Hall ( 1989), however, argues that military
expenditures are among the few exogenous macroeconomic variables that can be used to
identify macroeconomic structural models.
A financial crisis also emerged during the first year of the U.S. Civil War. See Hammond ( 1970).
See Sprague ( 1915), Morgan ( 1952), or Laughlin ( 1918) for descriptions of the
crisis and its control in the United States, Great Britain, and Germany.
The use of counterfeiting in warfare was not a new phenomenon. The British
themselves employed this method in counterfeiting continentals during the Revolutionary
War. The British openly advertised that they would distribute quality counterfeits to
anyone at the cost of the paper. See Newman ( 1957) ( Ron Michener pointed out this
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Global Corporate Intelligence:Opportunities, Technologies, and Threats in the 1990s.
Contributors: George S. Roukis - Editor, Hugh Conway - Editor, Bruce H. Charnov - Editor.
Publisher: Quorum Books.
Place of publication: New York.
Publication year: 1990.
Page number: 264.
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