Augustine weapons are costly, high-technology weapons. They are
associated with Norman Augustine, who forecast that by 2054 the entire US defense
budget would purchase just one aircraft. This reflected the observation that the unit cost
of fighter aircraft had grown by a factor of four every ten years. According to
Augustine, new technology opens vast new capability vistas, which are then crammed
into each new generation of weapons. Computers and software represent vast new
capabilities. An economic approach is taken, which begins with a principal-agent
framework for procurement and project management. The military-industrial-political
complex provides the background to procurement choices. A significant problem is the
lack of any money valuation of defense output. The procurement problem is outlined in
terms of what to buy, how to buy it, from which contractor, and when to make the
purchase. A brief history of UK military aircraft and associated procurement policy is
presented. The following section presents UK evidence on cost escalation and
statistical evidence on the determinants of unit prices for UK fighter and bomber
aircraft. Cost-quantity relationships for the Vampire aircraft are presented. The article
concludes by assessing prospects and challenges.
Keywords: Augustine, Collaboration, Competition, Contracts, Cost escalation, Costs, High technology, Measures of defense output, Principal-agent problem, Substitution, UK military aircraft, Unit costs, Weapons systems.
