| The United States Government, hereafter referred to as the "federal government," formed different contractual relationships with private companies in the production of three different weapon systems--muskets, warships and airplanes--in the nineteenth and early twentieth centuries.;The federal government co-produced muskets with private arms makers for the army and state militias until the 1840s. Thereafter, these muskets were only manufactured in the federal armories. The discontinuation of musket contracts coincided with the realization of high volume interchangeable parts manufacture at the Springfield armory. After the War of 1812, wooden warships were also constructed almost exclusively in federally operated facilities. However, in the last two decades of the nineteenth century, the policy of using the naval shipyards for new ship construction was reversed as almost all of the warships of the "new steel navy" were built by private shipyards. In the twentieth century, the federal government relied completely on private industry for military aircraft and for the airplanes used by the Post Office Department, even though it was the largest customer for airplanes in the years preceding World War II.;This study examines these different contractual relationships in the context of transaction cost economics. The transactional attributes, especially asset specificity, present in the design and manufacture of these three weapon systems generally support the efficiency of these relationships. The efficiency of musket manufacture rests on the specialized technology employed and the production and transaction economies available to the federal government. The construction of wooden warships in the naval shipyards is the one relationship for which there is the least support. The uncertainty in naval appropriations for new ship construction is the primary determinant of their efficiency. The need for innovation coupled with production economies made private shipyards a better choice for building steel warships. Innovation played an important role in airplane manufacture as well. Consequently, bilateral relationships, precursors to the "military-industrial complex," were established for both of these weapon systems backed by significant commitments by the federal government and private industry to stabilize these relationships. |
