This weekend new hostilities have broken out in the ongoing Israel Palestine conflict.

Over the weekend there's been a huge number of missile, rocket and drone strikes. This leads to counter rocket, missile and artillery defense (often referred to by the acronym C-RAM) systems being of huge tactical and strategic importance. The Israeli's field a system called the Iron Dome which is a very high tech air defense system capable of intercepting incoming rockets.

There was a meme going around a years ago about how "expensive" the Phalanx CRAM system was to operate. This system is basically a high precision 20mm cannon that has an extremely high rate of fire of 4500 rounds a minute. It seems to be known for being exceedingly loud and also for being "expensive". When using 20mm rounds that cost $25 each, some quick calculations show that 4500*25 = $112500 per minute for firing at the full rate. Of course these systems are not used with continuous firing for prolonged periods of time because the heat generated would melt the barrels, unless they are made of some advanced material I don't know about.

The Iron Dome system, much like other missile defense systems such as the Patriot Missile system and the S300/S400 series are not cheap systems to operate, requiring very expensive munitions along with high tech detections systems and highly skilled crews to operate them. These systems are obviously expensive to build and run but yet every advanced military fields these systems. Why does every large military invest in this?

In short because it saves them considerable materiel to field these systems and the savings make it all worth it. The longer answer is not something I'll get into here.

The usage of these systems almost always leads to comments about the operations and economics of these systems by outsiders and many commentators miss an extremely important point about why they exist. Here's some comments I came across today:

the problem with the iron dome. The missiles used to defend their territory are more complex and expensive than the missiles used to try to breach it, making it vulnerable to depletion

Every single one of those interceptor missiles is probably an American’s life saving’s worth of tax money gone up in smoke.

Unfortunately the problem is that each Iron Dome missile costs a lot more than the cheap primitive missiles it shuts down. Same problem in a way the Ukraine is heaving stopping the cheap Iranian drones. So there is a limit of how long you can keep intercepting. At some point Israel will need to switch gears to stop this attacks but for now it might buy some time. Giving that Iran is also again popping up in this context -- probably the west should switch gears there in general, too.

Basically the thing is, these systems are expensive, no argument there. But the question that must always be asked with all economic questions of cost is expensive must be compared to some other alternative. We must ask expensive compared to what?

If you can save much more expensive materiel by implementing a defensive system it likely makes sense to do it. The defensive system itself could be expensive but as long as that prevents even more expensive materiel being lost, or helps achieve tactical or strategic goals it's probably worth it.

Sure an iron dome missile interception might cost the equivalent of someone's life savings to fire, but if that interception saves something like a power plant from getting destroyed that's instantly worth it. The power plant is going to be many multiples of someone's life savings in cost to replace, not to mention that there's extreme strategic importance in maintaining the power grid.

Ultimately war is expensive, but these defense systems can be less expensive than the alternative in which they do not exist.

Why this matters in the civilian world

I have no involvement with projects in the military world so I can't accurately comment on the economics of military operations like I can with civilian ones, there are no doubt many nuances I do not understand in the military world. Military logistics and military operations have vastly different objectives and constraints compared to civilian operations, so intuitions as to the best decisions making are going to be quite different in the military world compared to the civilian world. However the whole reason I wrote this post is that many people have a version of this misconception in the civilian world when estimating the costs of interventions. The misconception goes something like: "This ... system is extremely expensive, we can't afford to keep running it if ... keeps happening".

They look only at the cost of the intervention and not at how much money the intervention saves. We see this in areas like firefighting technology and flood mitigation. We also see this in various maintenance decisions, where maintenance is a highly obvious expense but the failure modes from a lack of maintenance are not immediately obvious. Doing some things can look expensive but the amount of damage they save makes the expenditure look extremely cheap, the bigger picture is always what matters the most when considering these sorts of things.

The average yearly insurance claims for fires and floods are enormous each year. But yet there are people who make claims along the lines of "firefighting is expensive and we just can't keep affording these budgets if we keep get fires year after year". On the surface this argument appears to have some merit, but upon closer examination it entirely lacks merit. The reason is that the damages from not doing firefighting and investing in firefighting technologies is enormous, but more specifically the cost of inaction is considerably higher than the cost of action.

The reason literally every single country in the world, along with many large corporations that deal with flammable materials on a regular basis, have a fire fighting department, is because they simply cannot afford not to.

Often I think pointing out the costs of a system without a fair assessment of the savings is something that is done for disingenuous reasons, usually by those campaigning to cancel the funding for a system. Unfortunately because many people are economically illiterate enough people fall for this deception so we keep seeing this deceptive technique used.