Cover: Understanding the Ministry of Defence's Wider Contribution to UK Prosperity

Understanding the Ministry of Defence's Wider Contribution to UK Prosperity

Measuring Defence Output

Published Jul 14, 2021

by Luke Huxtable, Kate Cox, James Black, Keith Hartley, Ronald E. Smith, Matthew Uttley, Benedict Wilkinson, Charlene Rohr, Hui Lu

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Research Questions

  1. What different methodologies could be used for measuring or estimating the primary economic benefits of defence?
  2. Which methods are most appropriate (i.e. relevant, feasible) and should therefore be investigated as a matter of priority?
  3. How transferrable is each of the methodologies to the defence context?
  4. What are the barriers to, and opportunities of, applying each approach in the defence context?
  5. What could a defence-related equivalent of each approach entail, and how would this methodology work in practice?
  6. What are the possible applications of each approach for defence decision-making, and what areas for further research or refinement can be identified?

Despite the growing policy emphasis on understanding the value of UK defence, assessing the primary benefits of defence remains a challenge. Defence is inherently complex, and it remains difficult to prove that the non-occurrence of an event (e.g. a conflict) is directly related to the existence of defence capabilities and activities. Linked to these challenges, connecting defence activity and output to defence outcomes and benefits remains elusive.

This study has explored the potential of five methodologies (lines of enquiry — LOEs) to measure the contribution of defence to UK prosperity in terms of its primary benefits (i.e. protection from external threats). These are:

  • LOE1 — defence analogue to Quality Adjusted Life Years (QALYs)
  • LOE2 — Value of a Statistical Life (VSL) measures;
  • LOE3 — insurance policy techniques;
  • LOE4 — logic models and proxy indicators; and
  • LOE5 — discrete choice experiments (DCEs).

This study has identified a range of insights for the Ministry of Defence on how to apply and further develop these methodologies towards measuring the primary benefits of defence. This study has been exploratory, and it was expected that not all approaches would be viable.

Key Findings

  • Based on the research into the five individual LOEs, it is apparent that whilst none offer a comprehensive solution in their own right, PALYs (LOE1), VSL (LOE2), logic models and proxy indicators (LOE4) and DCEs (LOE5) each offer opportunities that could pave the way for an improved understanding of defence's contribution to prosperity.
  • Insurance techniques (LOE3) cannot measure primary benefits, but could support defence decision-making by helping to conceptualise, manage and 'price' defence risks.

Recommendations

The MOD should consider taking forward the research from this study in the following ways:

  • Develop an improved understanding of how defence contributes to national prosperity, by further developing and refining the defence logic model (LOE4).
  • Improve the understanding and quantification of public perceptions of defence, its benefits and opportunity costs through the use of a DCE (LOE5).
  • Consider the development of new approaches to quantify (and possibly monetise) the benefits of defence, especially through PALYs (LOE1) and VSL (LOE2).
  • Employ proxy concepts for assessing the benefits of defence where actual measures of benefit cannot be identified or developed (see specific suggestions under LOE4).
  • Engage with insurance industries to identify which techniques might help to improve the MOD's management, modelling and pricing of defence risk.
  • Apply each assessment framework to a particular area, such as a specific mission-type, to test the application of multiple methods to a specific question of quantifying primary benefits of defence.

Research conducted by

The research described in this report was commissioned by the UK Ministry of Defence (MOD)'s Defence Science and Technology Laboratory (Dstl) and conducted by RAND Europe.

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