The Political Economy of Aerospace Industries – by Keith Hartley

November 25, 2014

Author Articles, Economics Finance

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photo: U.S. Air Force photo/Staff Sgt. Benjamin Wilson (CC-BY 2.0)

 

Aerospace is often viewed as an important industry. In his new book The Political Economy of Aerospace Industries: A Key Driver of Growth and International Competitiveness? Professor Keith Hartley considers whether this view is justified.

This book examines the industry’s importance, whether there is an economic case for government support of the industry or whether some of the arguments are spurious and examples of special pleading. Economists have the task of identifying myths, emotion and special pleading and subjecting them to rigorous and critical economic analysis with an assessment of the supporting evidence.

 
The aerospace industry is a relatively new industry which did not exist in 1900 but by 2014 had been transformed from an aircraft industry to an aerospace industry. Rapid technical progress has been a major feature of the industry. Since its creation in 1903, it has produced aircraft which fly faster, further and higher carrying greater loads more safely. It has moved from the earth’s atmosphere into space and replaced manned aircraft with missiles, rockets and unmanned air vehicles (UAVs). Governments have been central to the development and transformation of the industry through their military demands and state funding of both military and civil aircraft. The importance of government means that the industry can be analysed using both conventional economics and the economics of politics and public choice analysis.

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All aspects of the economics of the industry are analysed. There are chapters on aerospace markets, the economics of the industry, technical progress and the industry’s structure, conduct and performance. The economic case for subsidy is outlined and assessed; the example of BAE Systems is used as a company case study; the procurement problems of buying military aircraft are discussed; and there is a detailed treatment of international collaboration.

 
The book concludes by reviewing the industry’s future prospects: what might it look like in 50 years time? The future aerospace firm will be radically different from today’s aerospace firm, just as today’s firms are different from those in the early 1900s and in 1945. After all, today’s giant aerospace firms did not exist in the early 1900s and many of the firms which existed in 1945 have since disappeared. No doubt the aerospace firm has a future but the firm of 2065 will be radically different.

 

hartleykKeith Hartley is a defence economist with a life-time’s interest in the aerospace industry. He is Emeritus Professor of Economics at the University of York where he was the Director of the Centre for Defence Economics and was founding Editor of the journal Defence and Peace Economics.   

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