Unproductive Entrepreneurship in U.S. Military Contracting

Abstract

U.S. military contracting has been plagued by systematic corruption, fraud, and waste during both times of peace and war. These outcomes result from the inherent features of the U.S. military sector which incentivize unproductive entrepreneurship. The military sector is characterized by an entangled network of government bureaus and private firms whose existence is dependent on continued government spending. These realities, coupled with dysfunctional procurement processes, reward unproductive behaviors during peacetime. During wartime these incentives are intensified, as significant emergency resources are injected into an already defective contracting system. Together, these factors create a magnetic force which attracts unproductive entrepreneurs like bees to honey. The recent experiences in Afghanistan and Iraq illustrate these dynamics.

Keywords: Afghanistan, Contracting, Cronyism, Corruption, Iraq, Unproductive Entrepreneurship

JEL Classification: H40, H56, H57, L26