War and the Economic Concept of Change

Exchange is an important concept in economics, whether we consider the consumer or the producer, and whether this produces bubble gum or, like the state, national defense. If the price of a good (or service) rises relative to the price of other goods, a partially rational consumer will substitute another one however it can be changed according to his preferences. Similarly, if the price of an input rises relative to the price of another, a rational producer will substitute the latter. For example, if the price of labor increases relative to the amount of robots (a type of capital goods), the company will substitute other uses of the robot for other labor services. (Co-blogger Kevin Corcoran provided additional explanations in a later post.)

There is a lot of formal theory that explains the rationality of that change either for the consumer who maximizes his consumption or the producer who maximizes his profit. As I have suggested, the theory also applies to a rational government or an army, which does not make a legitimate profit but instead is interested in increasing its defense (or offensive) output, at least up to a point (for more complex views of the situation, other measures exist).

A story from The Economist he recently provided an illustration of changing war production (“Why Economic Warfare Almost Always Misses Its Target,” October 3, 2024). The magazine explains how today’s “economic warfare” involving “sanctions” or export restrictions seems to be having no intended effect. The goal is to deprive an adversary or potential adversary of a “strategic advantage” or, in our mercantilist world, to deprive the “adversary” of a valuable input trade. Economic warfare methods are often ineffective because there are few goods that have no substitutes. Using substitutes will cost more or reduce production but will continue. Remedial measures will be available.

I EconomistThe picture ‘s related to what happened when, between August and October 1943, American planes bombed Schweinfurt in Germany, the city where part of the Third Reich’s supply of ball bearings was produced. Ball bearings were used in many military equipment, from engines to automatic rifles. In time, after the destruction of the production capacity in Schweinfurt, the German government changed some of the inputs and, after some time, was able to resume the production of balls that were “still necessary” despite the high costs:

It was soon discovered that, in many cases where manufacturers used to swear by balls, simple bearings would suffice. With the leftovers, more piles could be used, which bought time to build replacement plants and, eventually, engineer balls out of more munitions.

A US government report issued two years later “found no evidence that the attack on the ball handling industry had a disproportionate effect on the production of the war.” It likely imposed a high cost on the enemy combatant, however.

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DALL-E, to whom we owe the featured image of this post, has done a great job with the bot, but the reader will easily find many mistakes and glitches. Your blogger is responsible for establishing the name of the German manufacturer displayed.