The Cost Curve as Deterrent: Compound Warfare Economics, Saturation Dynamics, and the Structural Unaffordability of Great-Power Conflict

Abstract

This paper argues that compound cost asymmetries in modern warfare make great-power direct conflict structurally unaffordable and proposes a novel deterrence architecture grounded in that arithmetic. The paper introduces the Cost Asymmetry Ratio (CAR)adversary offensive unit cost divided by US defensive response cost-as a precision metric for defense investment evaluation. Monte Carlo simulation (N = 10,000) of fourteen canonical threat-defender pairings finds that twelve favor the adversary; a $500 FPV drone forces a $3.7 million Patriot response (CAR = 0.000135). Directed energy inverts the exchange permanently: Iron Beam at $2 per shot yields CAR = 10,000 against Shahed-136 drones. Two-war stochastic depletion analysis shows that no U.S. interceptor system survives 90 days at current inventories and production rates; SM-3 IIA depletes at day 15. Optimal allocation of a $1 billion marginal increment produces zero investment in THAAD, SM-3, or SM-2. Cost-curve deterrence is presented as the third pillar of the Mutual Threshold Saturation (MTS) framework, alongside supply chain vulnerability and compound economic fragility.

Keywords: National Security, Defense Spending, great-power conflict, Mutual Threshold Saturation, Cost Asymmetry

JEL Classification: H56, D74, L64, O33, C63