Document created: 11 August 05
Air University Review, September-October 1966

A Pentagon Fable

Major General Glenn A. Kent

It is well known that analyses cannot possibly take into account all the many factors involved in the complex problems of modern warfare. Many factors are intangible and simply cannot be quantified. Even so, it is quite useful to conduct analyses that take into account those things that can be quantified. Such analyses display the outcome—for example, the cost of doing a given job—for a given set of inputs, based on a rigorous and logical treatment of those inputs. But things go astray if the decision-maker focuses only on those things that have been displayed by the analyst, since the analyst can only choose those factors that are amenable to being fed into a computer.

The protest here is against the prevalent practice of decision-makers’ ignoring, in effect, those factors that cannot be quantified, even when those factors—intangible though they may be—are sometimes crucial to the decision. Can it be that too much attention is paid to the “dollars”—and “dollars only”—in “cost effectiveness”?

The scene is an office in the Pentagon. The discussion has to do with selecting a new tactical fighter from among several proposals. Some fighter pilots are making (or trying to make) the case that what we should do is select the best d-- tactical fighter that U.S. industry can produce. But they are brought up short by a scholarly gentleman schooled in econometrics who insists that “what we really must do is buy the most “cost effective” tactical fighter.” Our scholar then adds thoughtfully, “This may not be the most expensive or best.”

The fighter pilots proclaim their dismay regarding the overall concept of “cost effectiveness” –it will never take the place of military judgment. But, all in all, when the dust has cleared, one has the feeling that the recommendations based on cost-effectiveness studies will surely have an important bearing on the decision as to which fighter aircraft is to be developed and procured. The fighter pilots seem doomed to inglorious defeat in trying to have their way.

But wait! One lone fighter pilot, more heady than the rest, actually seems willing to take on these veteran analysts in the airy battlefield of econometrics. He rallies his forces with the clarion cry, “We have just begun to analyze!” He states, incredibly enough, that it is precisely in the arena of cost effectiveness where a compelling case can indeed be made for the “best d-- fighter,” and he launches into a lengthy technical discourse to make his point.

“Let us take the following example, gentlemen. Design studies by industry have just been completed. We have five candidate aircraft of varying effectiveness, ranging in cost from X million dollars for the least expensive, Candidate A, to 3X million dollars for Candidate E, the best and most expensive aircraft—at least on a unit basis. Now suppose that with the assistance of a magic computer model we have calculated how many of each type of aircraft are required to accomplish a given overall 'job.' (This job is the same for all candidates.) The computer tells how many aircraft are needed for this ‘constant job’ if we use Candidate A, how many if we use Candidate B, and so on through E. Now, knowing the cost of each aircraft, one can compute the cost of the overall force to do the 'job' According to the normal standards of cost effectiveness, the aircraft that ‘wins’ is the aircraft that can accomplish the ‘job’ at least cost for the entire force. It may not be the aircraft with the lowest unit cost nor the aircraft with the best individual performance.”

“Now suppose that it turns out that the ‘force cost’ ranged from Y million dollars for Candidate C to 2Y million dollars for Candidate E. Thus Candidate C is the ‘winner,’ and Candidate E, the fighter pilots’ favorite, is a dead last—at least so far.”

“But up to this point we have only kept track of one kind of ‘cost’—money from the U.S. Treasury. However, there are other ‘costs’. So let’s go back to the computer and ask it to print out another ‘measure of merit’—How many pilots were killed, for each candidate aircraft, in accomplishing the ‘job’? We can now plot a ‘scatter diagram’ (Figure 1) with ‘pilots lost’ on the ordinate and ‘dollars spent from the U.S. Treasury’ on the abscissa.” 

“To remind you, in each case we are accomplishing the same ‘job’—with Candidate C for Y dollars and with Candidate E for 2Y dollars. The first thing we note is that as we spend more money from the Treasury, we lose fewer pilots. This is not unexpected and certainly agrees with one’s intuition or, better still, one’s judgment. Another thing we note is that Candidate A is ‘dominated’ by Candidate B in both 'measures of merit.' Candidate A has a higher ‘force cost’ than B and also has more ‘pilots lost’ than B. Thus A can be discarded. But how do we choose among the others?”

“There is a well-known technique for making this choice. It is very simple. All one has to do is put both ‘measures of merit’ in the same currency—dollars. Then draw equal cost lines. Note that these equal cost lines take into account the sum of the cost of the two commodities being spent. That is, everywhere on the line we are spending the same amount of money (total), and the candidate that ‘wins’ is the candidate on the lowest of these equal cost lines. The diagram in Figure 2 illustrates this point.”

Figure 2

“Forgive me,” the young officer asks, as he peers out over his colored goggles, “for boring some of you with this digression on techniques used by those schooled in econometrics. But I did want to establish clearly how this technique is used in cost-effectiveness analyses. And now back to Figure 1, which portrays our real problem about tactical fighter aircraft.”

“Unfortunately, here there is a serious problem of drawing an ‘equal cost line.’ In the little schematic diagram I just gave you, Figure 2, it was ‘easy-both the ordinate and abscissa were in the same currency, namely dollars. But how do we convert ‘pilots lost’ to the currency of dollars?”

“Note now we are not talking about the cost of training and feeding pilots-that can be measured in dollars and is included in the costs on the abscissa. Rather, we are talking about costs that, for want of a better name, I will call ‘political costs.’ These costs are rather intangible. It is difficult to put a price on losing Americans in battle. Perhaps you will note that the ‘cost’ of the commodity on the ordinate (and not the cost on the abscissa) is most prominent in the discussions of the war in Vietnam. The cost might be as high as forcing the U.S. to take fewer measures than the situation demands when based strictly on military considerations. In fact, in some instances, the anticipated cost on the ordinate might be so high that the U.S. would refrain from taking positive action in the first place or be forced to abandon military action even though other factors argued against such a course.”

“Suffice it to say, the cost of pilots lost in terms of dollars is incalculable. But we can make some limiting statements. If the dollar cost of ‘pilots lost’ is zero, then the equal cost lines are vertical and Candidate C is clearly the ‘winner.’ If the cost of ‘pilots lost’ is infinite (very large in terms of U.S. Treasury dollars), then equal cost lines are horizontal, or nearly so, and Candidate E is clearly the ‘winner.’ ”

Now our hero presses for the kill.

“I, for one, would not be foolhardy enough to try to establish the slope of such a line. However, it is my contention that the slope is more nearly horizontal than vertical. On this point, I may have some bias. But I am surely closer to the mark than those who do cost-effectiveness analyses with the inherent assumption (by not treating this matter explicitly) that the slope is vertical. I demand that the cost of all commodities be accounted for—‘total cost effectiveness’ if you will. Once it has been established that all commodities are to be considered, including the cost to the nation of losing pilots, I intend to haggle vigorously about the slope of the line.”

Contributor

Major General Glenn A. Kent (M.S., California Institute of Technology; M.S., University of California) is Deputy Chief of Staff, Plans, Hq Air Force Systems Command. After entering the Army Air Corps as a cadet in 1941, he first served as a weather officer at Goose Bay, Labrador, and during 1943-44 was stationed in Greenland. He studied radiological engineering at the Naval Postgraduate School, Annapolis, in 1947. Since 1950 his assignments have been in various aspects of research and development: on the Air Staff as a project officer for atomic weapons; as Deputy Director, Research Directorate, Air Force Special Weapons Center, Kirtland AFB, New Mexico; as Chief, Weapons Plans Division, Office of the Director of Plans, Hq USAF, 1957-61; as Military Assistant to the Deputy Director of Defense Research and Engineering (Strategic and Defensive Systems), Office of the Secretary of Defense; and as Deputy Director for R&D Analysis, DCS/Research and Development, Hq USAF, from July 1965 until his present assignment. General Kent is a graduate of the Air War College. During the academic year 1961-62 he was a Fellow of the Center for International Affairs at Harvard University, and in 1963 the Center published as an Occasional Paper in International Affairs his thesis “On the Interaction of Opposing Forces under Possible Arms Agreements.”

Disclaimer

The conclusions and opinions expressed in this document are those of the author cultivated in the freedom of expression, academic environment of Air University. They do not reflect the official position of the U.S. Government, Department of Defense, the United States Air Force or the Air University.

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