When Oliver Williamson built transaction cost economics into a Nobel-winning architecture, he warned that markets and hierarchies were not interchangeable. Some exchanges are too specific, too uncertain, or too consequential to leave to spot transactions. The corollary, often overlooked, is that redundancy — duplication, slack, parallel capability — is not waste. It is an embedded option whose value rises precisely when transaction costs spike. Israel, perhaps more than any small economy on earth, has internalised this logic, even when its critics call it inefficient.

Consider the architecture. Israel maintains overlapping intelligence services across Mossad, Shin Bet and Aman; parallel missile defence layers from Iron Dome through David’s Sling to Arrow-3; coastal desalination plants supplying around 70 to 80 percent of the country’s drinking water; and a venture ecosystem underwritten by R&D spending of roughly 6.3 percent of GDP, more than double the OECD average. To an orthodox economist trained on lean optimisation, this looks profligate. To a real options theorist, it looks like a portfolio of call options on contingencies that have not yet arrived, and whose strike prices are written in blood, water, or sovereign survival.

The 2026 Iran war sharpened the lesson in real time. From the 28 February US–Israeli strikes onward, the exchange of missiles and drones across the region has not truly stopped, generating something rare in defence economics: a live dataset on layered interception under sustained salvo. And here the redundancy thesis meets its hardest test. A leaked Channel 12 report in March revealed that Israeli planners are now divided over........

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