Defense economics : an institutional perspective Introduction: The Fundamental Economic Problem of the Military Institutions and Armed Forces Effectiveness of Military Performance Efficiency of Military Performance Opportunities for Reform. This textbook examines the economic problems of military organizations from an institutional perspective. It discusses the efficiency and effectiveness of military performance using a capability based conceptualization. Constitutional historical and economic considerations complement the analysis. Neither the analysis nor the conclusions depend on any specific armed force culture organization or language. On the contrary the challenge of defense economics analysis and armed forces management is reduced to a fundamental economic problem and solutions to this problem are offered. This book is a must read for students scholars and practitioners interested in a better understanding of defense economics.