Economists model national defense as a pure public good optimally provided by a benevolent and omnipotent “defense brain” to maximize social welfare. I critically consider five assumptions associated with this view: (1) that defense and security is a pure public good that must be provided by a national government, (2) that state-provided defense is always a “good” and never a “bad”, (3) that the state can provide defense in the optimal quantity and quality, (4) that state expenditures on defense are neutral with respect to private economic activity, and (5) that state-provided defense activities are neutral with respect to domestic political institutions. I discuss an alternative framework—the “individualistic view”—for analyzing defense provision and suggest it is superior for understanding reality.
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One exception to the dominant view is Henderson (2007), who emphasizes the importance of focusing on the information and incentive constraints facing government in the areas of foreign policy and defense provision.
Interestingly, economists studying defense have recognized a variant of this point in the theory of alliances. The original “public good model” (see Olson and Zeckhauser 1966) predicted that wealthier countries would shoulder more of the burden in terms of expenditures relative to poorer nations due to free riding. When empirical analysis of these predictions found mixed results scholars developed the “joint-product model” (see van Ypersele de Strihou 1967; Sandler 1977 ) which differentiated between private, semi-public and public aspects of defense. The presence of private and semi-public defense goods incentivizes nations to contribute more than predicted even if they are smaller or poorer. Unfortunately, this appreciation of the varying private-public characteristics of defense has largely been applied in studies of interactions among nation states and not within nation states. For a comprehensive overview of the theory economic of alliances, see Sandler and Hartley 2001.
There has been a small, but growing literature on “global public goods” which refer to goods with public characteristics for a region or for the entire world (see, for instance, Sandler 1998, 2004, 2006; Kaul et al. 1999). Standard examples include environmental issues, disease, trade and financial stability, and conflict. However, there is little to no recognition that efforts to generate global public goods and also produce global public bads.
For a discussion of practical issues with the Vickrey-Clarke-Groves process, see Rothkopf (2007).
Holcombe (2008) raises a similar point and argues that the government does not provide defense to solve a market failure, but rather to protect its source of income (i.e., the tax base).
At the margin, entrepreneurs are indifferent between additional rents earned by creating new and less expensive products that benefit the general public (productive activities) and by seducing government (unproductive activities) (see Buchanan 1980). Given this, institutions are crucial in establishing a payoff to different types of entrepreneurial activities (see Boettke and Coyne 2003, 2009; Coyne and Leeson 2004).
Kealey (1997) provides an economic analysis of government funding of scientific research and argues that government-funded projects are often inefficient and wasteful.
In 2008, the U.S. Congress passed a law as part of the National Defense Authorization Act which required two things. First, generals, flag officers, senior civilians, and program officials were required to obtain written legal opinions about potential jobs in the private sector. Second, the Department of Defense was required to maintain a centralized, accessible database with these opinions for a 5-year minimum (for more on post-employment laws for federal personnel see Maskell 2014). However, a 2014 report by the Inspector General found that the database “was incomplete with limited or no use by specific DoD organizations with significant contracting activity” (Department of Defense Inspector General 2014: i).
For more on the political economy of public advertising see Wagner 1976.
Economists are aware of the military-industrial complex but it is often assumed that “the concept appears to be most of value as a descriptive rather than an analytical concept” (Dunne 1995: 411).
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Coyne, C.J. Lobotomizing the defense brain. Rev Austrian Econ 28, 371–396 (2015). https://doi.org/10.1007/s11138-015-0316-x
- Defense brain
- Individualistic view
- Military-industrial complex
- National defense
- Organismic view
- Public bad
- Public good