Introduction and Summary of the Book

Abstract

In the aftermath of World War II and height of the Cold War, the normative approach to the economics of alliances seemed paramount. Historically, an alliance formed when academic economics strived to assist the beleaguered civil and uniformed servants who were trying to formulate and execute policy. However, due in part to the Vietnam War and especially by the end of the Cold War, the gap between academic economics and policy implementation widened. This book develops a theory of risk management with public goods, integrating the likelihood of loss, magnitude of loss, and isolation from loss into a consolidated model of alliances. It extends existing concepts of individual risk management by a single person to decision theory for an entire country, managed by a government bureaucracy and lodged in a universe of overlapping alliances.