Nuclear science, event studies, and the other side of Armen Alchian

by on May 12, 2014 at 1:21 pm in Economics, History, Science | Permalink

I had not known of this:

At RAND in 1954, Armen A. Alchian conducted the world’s first event study to infer the fissile fuel material used in the manufacturing of the newly-developed hydrogen bomb. Successfully identifying lithium as the fissile fuel using only publicly available financial data, the paper was seen as a threat to national security and was immediately confiscated and destroyed. The bomb’s construction being secret at the time but having since been partially declassified, the nuclear tests of the early 1950s provide an opportunity to observe market efficiency through the dissemination of private information as it becomes public. I replicate Alchian’s event study of capital market reactions to the Operation Castle series of nuclear detonations in the Marshall Islands, beginning with the Bravo shot on March 1, 1954 at Bikini Atoll which remains the largest nuclear detonation in US history, confirming Alchian’s results. The Operation Castle tests pioneered the use of lithium deuteride dry fuel which paved the way for the development of high yield nuclear weapons deliverable by aircraft. I find significant upward movement in the price of Lithium Corp. relative to the other corporations and to DJIA in March 1954; within three weeks of Castle Bravo the stock was up 48% before settling down to a monthly return of 28% despite secrecy, scientific uncertainty, and public confusion surrounding the test; the company saw a return of 461% for the year.

That is from a new paper by Joseph Michael Newhard, via the excellent Kevin Lewis.  There is an ungated copy of the paper here.

Brian May 12, 2014 at 1:35 pm

It wasn’t the “fissile material” in the first hydrogen (fusion) bombs that was a mystery.

Finch May 12, 2014 at 1:40 pm

Yeah, that’s a pretty major error for the first sentence of your abstract.

Was the bomb business ever more than rounding error in the lithium market? Lithium has industrial uses and bombs are tiny. Who did the isotopic processing?

gwern May 12, 2014 at 2:45 pm

> Was the bomb business ever more than rounding error in the lithium market?

The paper doesn’t make any sort of calculation that I can see, but let’s take a look.

pg25 says that US production was 1,250 metric tons at $2130/ton in 1955. (World production is higher, but what are we going to do, outsource our bomb materials to *Commies*? We’ll be using good old American lithium!) We need lithium ore purified to 40% Li6:

> “The room-temperature Shrimp device used lithium enriched to 40 percent lithium6; it weighed a relatively portable 23,500 pounds”

https://en.wikipedia.org/wiki/Lithium says Li6 is is ~7.5% of natural ore, so we need 5x the target amount if we had 100% efficient purification (extract the 75kg of li6 from each metric ton, then throw in some waste li7). I don’t think isotopic seperation is anywhere near that efficient, so let’s double the factor to 10x.

We need somewhere between 100 kg – 1metric ton of purified ore:

> “Assuming the ignition problem could be overcome, Teller thought that hundreds of kilograms of Li6D might need to be produced.”5

Let’s assume the worst case, that we need 1000kg. So for 1 bomb, we need 10 x 1 metric ton or 10 metric tons, which was 0.8% of annual American production.

American bomb holdings peaked at 31,175 bombs, I see in Google, and built 70,000 total warheads ever (https://en.wikipedia.org/wiki/List_of_states_with_nuclear_weapons#United_States). I don’t see any convenient breakdown of A vs H-bomb holdings or how many H-bombs were using lithium, but let’s just say half. So that gives a total lithium consumption upper bound of

(2014 – 1945) * 70000 * 0.5 * 10 = 24,150,000 metric tons

or an average annual consumption of 5072 metric tons if you prefer it that way, which is much larger than American annual production.

So, it looks like that h-bombs actually *could* have represented a serious source of demand. (To refine this analysis further: figure out how much refined lithium each h-bomb actually needed, what actual ore->refinement ratio was, what % of manufactured warheads consumed lithium, and how much American lithium production expanded after 1955.)

Finch May 12, 2014 at 3:00 pm

Thank you, although I think 1000kg of lithium might be off by perhaps a factor of ten or more for a single bomb, your point stands that this was a noticeable amount of lithium, at least initially.

Most bombs weigh a few hundred kilograms, and the vast majority of that is fissile material and tamper.

Finch May 12, 2014 at 4:48 pm

Internet estimates seem to put the mass of lithium in a megaton bomb (which is much bigger than the average device) at about 15 kg.

So I’m back to thinking this shouldn’t have been noticeable in US lithium markets.

Adam May 12, 2014 at 5:46 pm

The magnitude of the shift in demand for lithium is only part of what would determine its price increase. The elasticity of demand for it is crucial. As are the contemporary forecasts of future growth in demand–which are most easily inferred from the excess returns measured in this paper.

Ray Lopez plays nuclear scientist May 12, 2014 at 1:50 pm

But wait–from memory–isn’t a fusion (hydrogen) bomb set off by a fission (atom) bomb? That’s the trigger, right? Unlike in a pure fission bomb, where the trigger is a conventional explosive fired either in a cylinder (Little boy / Fat boy) or spherical bomb (Fat boy / Little oby).

Brian May 12, 2014 at 2:10 pm

Yes, there is fissile material in a fusion bomb — and yes, first stage is a fission trigger, but that wasn’t a mystery and Lithium isn’t a fissile material.

Mark Thorson May 12, 2014 at 2:10 pm

Yes, but the fissile material for the fission trigger is plutonium (you could use uranium, but nobody does). Lithium is used in the fusion fuel.

Mark Thorson May 12, 2014 at 2:11 pm

I posted at the same time as Brian, but he’s colocated in the MR machine room. The comments are rigged, I tell ya!

John Mansfield May 12, 2014 at 3:24 pm

Lithium’s role in the secondary nuclear process is that it fissions when bombarded with neutrons and creates tritium that fuses with the deuterium. So maybe Newhard has it right and there was a search for a proper fissionable producer of tritium.

prior_approval May 12, 2014 at 3:16 pm

Thankfully, the Soviets weren’t paying attention to the DJIA in relation to corporation stock prices. Exactly the sort of mistake that Marxists-Leninists would be expected to make.

And being Russian, to make up for that doctrinaire socialist blind spot, they did this – http://en.wikipedia.org/wiki/Tsar_Bomba

Daniel May 13, 2014 at 2:59 am

Do you know that for a fact or are you just talking out of your ass (per normal practice) ?

http://militera.lib.ru/research/suvorov8/11.html

Let us consider one example. During the Second World War a section of the tenth directorate (economics and strategic resources) was studying the trends in the exchange of precious metals in the United States. The specialists were surprised that an unexpectedly large amount of silver was allocated ‘for scientific research’. Never before, either in America or in any other country, had such a large amount of silver been spent for the needs of research. There was a war going on and the specialists reasonably supposed that the research was military. The GRU information analysed all the fields of military research known to it, but not one of them required the expenditure of so much silver. The second reasonable assumption by the GRU was that it was some new field of research concerning the creation of a new type of weapon. Every information unit was brought to bear on the study of this strange phenomenon. Further analysis showed that all publications dealing with atomic physics had been suppressed in the United States and that all atomic scientists, fugitives from occupied Europe, had at the same time disappeared without trace from the scientific horizon. A week later the GRU presented to Stalin a detailed report on developments in the USA of atomic weapons. It was a report which had been compiled on the basis of only one unconfirmed fact, but its contents left no room for doubt about the correctness of the deductions it made. Stalin was delighted with the report: the rest is well known.

prior_approval May 13, 2014 at 4:57 am

So much for placement – see below.

Todd K May 12, 2014 at 4:09 pm

I’ve never seen a breakdown but weren’t most of those 70,000 warheads for very small tactical nukes? No where near 1000 kg.

Finch May 12, 2014 at 4:48 pm

And the vast majority of the mass is things other than lithium.

B Cole May 12, 2014 at 8:04 pm

The stock market hardly budged during Cuban Missile Crisis-1962. JFK said it was 50/50 for nuke war, and the Joint Chiefs told him to first strike fast. But then, what was point of being in cash after a holocaust?

Doug May 13, 2014 at 12:05 am

One way to think about efficient markets is as a type of learning machine that increases its accuracy over time. Market participants who continually out-predict their peers over time accumulate more capital and have more influence on setting prices. Nuclear war seems like a type of event that financial markets would do quite poor at predicting because they’ve had any of these events to learn on.

pokerplayer May 12, 2014 at 10:10 pm

If this site is any indication about the behavior of graduate students and professors in economics profession then no doubt the profession as a whole is losing its relevance: http://www.econjobrumors.com/

This site frequented by practitioners in economics profession is full of racist, homophobic, and misogynistic rants. Any kind of serious economics discussion is discouraged by the site owner and moderators. Vile threads and comments are not only tolerated but also encouraged.

No wonder the profession is in such a mess now. Just have a look at that site and you will see what I mean.

Steve Sailer May 13, 2014 at 12:05 am

This is part of a general pattern: A high fraction of the smartest guys in America were involved, one way or another, with nuclear weapons from the 1940s into the 1960s.

B Cole May 13, 2014 at 2:33 am

Boy, you are not kidding. Read up on Project Vista. About 100 scientists holed up in a hotel near Caltech and plotted out a tactical nuclear war in Europe. Caltech and MIT were worried that they had become appendages of the DoD.

The number of truly brilliant minds involved with the Manhattan Project is amazing.

Forgotten today is how the federal government used to dominate the hi-tech arena through defense and NASA and maybe the old AEC (now NRC).

Asher May 13, 2014 at 3:18 am

Quite implausible that this was the world’s first ever event study. I imagine that event studies have been performed since antiquity.

prior_approval May 13, 2014 at 4:08 am

Got me – ‘Exactly the sort of mistake that Marxists-Leninists would be expected to make’ was a joke. Mainly because Soviet intelligence had so thoroughly penetrated American nuclear programs before even the first atomic detonation at the Alamogordo Bombing and Gunnery Range that there were very few atomic secrets the Soviets were likely unaware of, particularly at the time of your cite.

Though that American penetration was handled through the KGB, not GRU (though Fuchs began his spying career through GRU). Which meant that the information you provided, though specific to the WWII time frame, was merely reinforcement of the direct information being provided by several people actually working on the bomb – Klaus Fuchs being only one (an equally opportunity spy, it must be noted – he also spied on the U.S. for the UK), while the others (and how many) apparently remain unknown.

And to keep that joke running a bit – a good materialist would be expected to keep track of resources extracted using the sweat and blood of oppressed workers, so it is unsurprising that part of the glorious vanguard of the revolution would be vigilantly tracking what the capitalist exploiters were doing with their ill-gotten gains, while still ignoring the machinations of financial parasites.

Willitts May 13, 2014 at 5:39 am

So McCarthy and HUAC were right.

prior_approval May 13, 2014 at 9:45 am

About having a list of communists? No, that was a lie.

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