Here’s an indication of the kind of thinking that predominated the post-WWII world, as expressed by Alain Enthoven who was ASD Systems Analysis in 1966:
The introduction of any major innovation requires not only a recognition of the need for change but also the availability of the tools for an effective solution. Both were present by 1961. The economic theory of price and allocation, a branch of moral philosophy in Adam Smith’s day, had been reduced to mathematical terms and made into a useable instrument for quantitative analysis of problems of choice. In the late 1940s, the Air Force established Project RAND and Mr. Charles J. Hitch began to assemble the Economics Division of the RAND Corporation.
The theory of price and allocation is nearly the entire problem of defense acquisition. What should be developed, bought, and fielded, and at what price? Enthoven and many others literally believed that these difficult questions could be “reduced” to mathematical terms. As Robert McNamara testified to Congress in 1961:
… in my mind, I equate planning and budgeting and consider the terms almost synonymous, the budget being simply a quantitative expression of operating plans.
So it is no wonder that financial engineers believed they should be in charge of the activities of actual engineers and military operators. With their financial data, they were in the best seat to make holistic rather than parochial decisions. And the fundamental basis of the analyses were captured in university economics. As historian James Roherty wrote:
Systems analysis does not utilize sophisticated mathematical techniques, as does operations research, but rather emphasizes basic economic concepts such as marginal products and marginal costs. Enthoven once observed that one learns the necessary economic theory in sophomore classes but not until after one’s Ph.D. is acquired does one believe what one has learned and acquire a vested interest in marginal analysis.
Certainly these beliefs appear silly to modern ears, and indeed Enthoven walked them back slightly over time. Very little sophomore economics appears anywhere in defense decision making. For example, I’ve never seen anyone decide the tradeoff between two weapon systems by calculating the tangency point between the production possibilities frontier and indifference curves.
Yet these blackboard exercises were the very intention of the PPBS system that still manages DoD today. Since the calculations flat out didn’t work, DoD has abandoned the tools but retains the structure and process. This has led to disastrous consequences. Organizing and planning something much larger than any firm — of the size and complexity of DoD — really does look more like a branch of moral philosophy than it does sophomore calculus.
I recommend the video below for more information:
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