Peace economics is a branch of conflict economicsSilwal, Shikha B., Charles H. Anderton, Jurgen Brauer, Christopher J. Coyne, and J. Paul Dunne. (2021). The Economics of Conflict and Peace: History and Applications. Cambridge, UK: Cambridge University Press. and focuses on the design of the sociosphere's political, economic, and cultural institutions and their interacting policies and actions with the goal of preventing, mitigating, or resolving violent conflict within and between societies. This violent conflict could be of any type and could involve either latent or actual violence.Brauer, Jurgen and Raul Caruso. (2012). "Economists and Peacebuilding." In Roger MacGintry (ed.), Handbook on Peacebuilding. London: Routledge. Recognizing the cost of violence, peace economics focuses on the benefits of (re)constructing societiesKeynes, John M. (1920). The Economic Consequences of the Peace. London: Macmillan.Boulding, Kenneth E. (1945). The Economics of Peace. New York: Prentice-Hall.Del Castillo, Graciana. (2008). Rebuilding War-Torn States: The Challenge of Post-Conflict Economic Reconstruction. New York: Oxford University Press.Brauer, Jurgen and J. Paul Dunne. (2012). Peace Economics: A Macroeconomic Primer for Violence-Afflicted States. Washington, D.C.: United States Institute of Peace Press. with a view toward achieving irreversible, stable peace.Boulding, Kenneth E. (1978). Stable Peace. Austin, TX: The University of Texas Press. Along with approaches drawn from other areas of scholarship, peace economics forms part of peace science, an evolving part of peace and conflict studies.Isard, Walter. (1992). Understanding Conflict and the Science of Peace. Cambridge, MA: Blackwell.
Despite overlaps, peace economics is distinct from war, military, defense, and security economics, all of which are branches of conflict economics. A key difference between peace economics and these related fields is that peace economics emphasizes the study of the presence of or conditions for peace, as distinct from studying the absence or presence of conflict, violence, war, or insecurity.
History of economic theories of peace
Peace economics has also been defined as "the use of economics to understand the causes and effects of violent conflict in the international system and the ways that conflict can be avoided, managed, or resolved."Anderton, Charles H. and John R. Carter. (2007). "A Survey of Peace Economics," pp. 1211-1258 in Todd Sandler and Keith Hartley, eds., Handbook of Defense Economics. Vol. 2. Amsterdam: Elsevier. The quote is from p. 1212. This restricts the subject matter to the international realm and leaves out the study of peace itself. Walter Isard, who is recognized as a pioneer in peace economics and the father of regional science in economics, defines peace economics as "generally concerned with: (1) resolution, management or reduction of conflict in the economic sphere, or among behaving units in their economic activity; (2) the use of economic measures and policy to cope with and control conflicts whether economic or not; and (3) the impact of conflict on the economic behavior and welfare of firms, consumers organizations, government and society."Isard, Walter. (1994). "Peace Economics: A Topical Perspective." Peace Economics, Peace Science, and Public Policy. Vol. 1, No. 2, pp. 11-13. The quote is from p. 11. [A slightly revised reprint of Walter Isard, "Peace Economics" in Douglas Greenwald, Editor in Chief, The McGraw-Hill Encyclopedia of Economics. New York: McGraw-Hill, 1994, pp. 767-769.] The notion of violence is absent and peace itself is not studied, but the level of analysis can be other than conflict between states. In a context restricted to international trade, another author writes that "Peace economics studies ways to eradicate and control conflict as well as to assess conflict's impact on society."Polachek, Solomon W. (1994). "Peace Economics: A Trade Theory Perspective." Peace Economics, Peace Science and Public Policy. Vol. 1, No. 2, pp.14-17. The quote is from p. 14. The notion of violence is not explicit and the benefits of peace are seen only inasmuch as a reduction of conflict may improve opportunities for expanded global trade. Others make a distinction between "productive" and "unproductive" or "appropriative" economic activities their starting point of analysis in peace economics.Haavelmo, Trygve. (1954). A Study in the Theory of Economic Evolution. Amsterdam: North-Holland.Dumas, Lloyd J. (1986). The Overburdened Economy: Uncovering the Causes of Chronic Unemployment, Inflation, and National Decline. Berkeley, CA: University of California Press.Baumol, William J. (1990). "Entrepreneurship: Productive, Unproductive, and Destructive." The Journal of Political Economy. Vol. 98, No. 5, Part 1 (October), pp. 893-921.Caruso, Raul. (2010). "On the Nature of Peace Economics." Peace Economics, Peace Science, and Public Policy. Vol. 16, No. 2, Article 2.
Economics Nobelist Jan Tinbergen defines peace economics as "economic science used for [a purpose that] prohibits [war] as an instrument of settling conflicts between nations and [to organize] the world in a way that warfare is punished".Tinbergen Jan. (1994). "What is Peace Economics?" Peace Economics, Peace Science, and Public Policy. Vol. 1, No. 4, pp. 3-5. The quote is from p. 3. Violence is addressed only at the level of sovereigns, not dealing with civil war or debilitating organized or individual-level criminal violence. In related work, Tinbergen writes about a world order that would inhibit violence and permit peace between and among states. In his view, this requires a "world government",Tinbergen Jan. (1994). "What is Peace Economics?" Peace Economics, Peace Science, and Public Policy. Vol. 1, No. 4, pp. 3-5. The quote is from p. 3 as well.Also see Tinbergen, Jan and Dietrich Fischer (1987). Warfare and Welfare: Integrating Security Policy into Socio-Economic Policy. New York: St. Martin's Press, and Tinbergen Jan. (1990). World Security and Equity. Aldershot, UK: Elgar. a sentiment not now commonly agreed among economists.
History of economic theories of peace
A number of peace economists are explicit about the use of particular explanatory schema to be applied in peace economics, e.g., rational choice theory.Dacey, Ray. (1994). "Peace Economics as the Political Economy of Peace and War." Peace Economics, Peace Science and Public Policy. Vol. 2, No. 1, pp.8-12. In contrast, the main definition of peace economics is open to a variety of approaches. Virtually all authors acknowledge that peace economics is part of both positive economics and normative economics.Arrow, Kenneth J. (1995). "Some General Observations on the Economics of Peace and War, Peace Economics." Peace Economics, Peace Science, and Public Policy. Vol. 2, No. 2, pp. 1-8. While for most contemporary economists, work in positive economics may lead them to lay out a descriptive array or evaluation of policy choices from which one that is most valued is recommended to or chosen by policy makers, in peace economics, in contrast, it is the norm of peace to be achieved that inspires the search for a system design that can reliably deliver on the desired norm.
Peace economics is built on general systems theory exemplified by the work of Kenneth Boulding.Boulding, Kenneth E. (1970). "Economics as a Social Science," pp. 1-22 and "Economics as a Political Science," pp. 77-96, both in Kenneth E. Boulding, Economics as a Science. New York: McGraw-Hill. Earth may be viewed as a self-regulating (homeostatic) system, consisting of natural and social subsystems. In each, deviation from a set goal is self-corrected through feedback loops. Homeostatic systems are commonly observed in nature, such as in ecology and in the physiology of organisms (e.g., self-regulation of population sizes, self-regulation of body heat). The systems concept has been adopted in the engineering sciences, for example in designing thermostats. The user sets a desired goal state (temperature), the instrument measures the actual state, and for a deviation of sufficient degree a corrective action is taken (heating or cooling).
Relatively new is the insight that social systems designed to achieve certain purposes (e.g., the retirement or pension system) imply a choice architecture that may permit failed or failing social systems to persist. Similarly, choice architecture may facilitate the (re)design of institutions aimed at securing beneficial social outcomes such as peace. This is social engineering applied to the problem of peace (peace engineering)Fischer, Dietrich. (1993). Nonmilitary Aspects of Security: A Systems Approach. Brookfield, VT: Dartmouth Publ. and overlaps with ideas of mechanism design (reverse game theory) in which a solution is stipulated a priori and the structure of the game that would bring about the desired outcome is inferred. In this way, system design links back to normative economics.
Examples
Free trade and peace
The classical English liberals of the 19th century largely believed that free trade promoted peace. This view, attributed to Adam Smith and Edmund Burke, was evident in the advocacy of Richard Cobden and John Bright, and in the writings of the most prominent English economists and political thinkers of the 19th and early 20th centuries, such as John Stuart Mill and Alfred Marshall. John Maynard Keynes said that he was "brought up" on this idea.Donald Markwell, John Maynard Keynes and International Relations: Economic Paths to War and Peace, Oxford University Press, 2006, chapter 2. A prominent 20th century US exponent of this idea was the Secretary of State under President Franklin Delano Roosevelt, Cordell Hull.
World War I and the Paris Peace Conference
Upon resigning from the United Kingdom's Treasury team at the Paris Peace Conference in June 1919, John Maynard Keynes penned a small book. Published in 1920, The Economic Consequences of the Peace famously lays out his case for why the allies' Terms of Peace to be imposed on Germany were physically and financially impossible to fulfill and how they would encourage Germany to rise up again. Predicting a coming World War II, Keynes wrote: "... if this view of nations and of their relation to one another (i.e., a Carthaginian Peace) is adopted by the democracies of Western Europe, and is financed by the United States, heaven help us all. If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long that final civil war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victor, the civilisation and the progress of our generation."Keynes, John M. (1920). The Economic Consequences of the Peace. London: Macmillan. The quote is from p. 251. Although Keynes' effort to change the treaty terms failed, it is a dramatic demonstration of what peace economics is about: the creation of a mutually reinforcing structure of political, economic, and cultural systems to achieve peace such that reversal to violence is unlikely.
Capitalism and war, and managed capitalism