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Lobotomizing the Defense Brain
Christopher J. Coyne
ABSTRACT 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 frameworkthe individualistic
viewfor analyzing defense provision and suggest it as superior for
understanding reality. KEYWORDS: defense brain, individualistic
view, military-industrial complex, national defense, organismic
view, public bad, public good JEL CODES: B25, H10, H40, H56
2014 Presidential Address, Society for the Development of
Austrian Economics Email: [email protected]. Address: Department of
Economics, George Mason University, MS 3G4, Fairfax, VA 22030,
USA.
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1 Introduction
What is the appropriate theory of the state when considering
issues of government finance and
expenditure? In exploring the answer to this question, James
Buchanan (1949) distinguished
between two potential foundations for the theory of public
finance. He termed these the
organismic view and the individualistic view of public finance.
The organismic view,
according to Buchannan, treats the state as a single entity
which acts as a fiscal brain to select
the values of key variables to maximize social welfare. From
this perspective public finance is a
purely allocative exercise, as the fiscal brain effortlessly
allots resources to maximize the value
of each variable in the social welfare function. The
individualistic view, in contrast, focuses on
the individual chooser as the unit of interest and analyzes how
individuals interact given the
incentives and constraints generated in various political
contexts. From this perspective public
finance outcomes are emergent and cannot be assumed to maximize
some notion of social
welfare, since the state has no ends outside of those held by
its constituent members. Buchanans
overarching point was that in order to have a theory of public
finance, one first had to have a
theory of the state. My core argument is that this insight is
relevant today to the field of defense
and peace economics, where it is often assumed that a benevolent
defense brain provides the
optimal quantity and quality of defense to maximize a nations
welfare.
Defense and peace economics emerged as a distinct field of study
in the 1960s and has
evolved over time to reflect changing global issues (see Sandler
and Hartley 1995: 1-16, Hartley
and Sandler 1995: 1-11, Hartley 2007a, Coyne and Mathers 2011
for an overview of the field).
Early work focused on economic models of: defense and national
security (Hitch and Roland
1960), arms races (Richardson 1960, Schelling 1966), conflict
(Boulding 1962), alliances (Olson
and Zeckhauser 1966), military contracting and procurement (Peck
and Scherer 1962), military
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personnel (Hansen and Weisbrod 1967, Oi 1967), and revolutions
(Tullock 1971). Since then the
topics falling under the purview of defense and peace economics
have expanded greatly and now
include not only the aforementioned subjects, but also
disarmament (Hartley et al. 1993), the
arms trade (Anderton 1995, Brauer 2007, Hartley 2007b, Kinsella
2011, Brauer and Dunne 2011,
Coyne and Hall 2014a), arms proliferation (Brito and
Intriligator 1995), disarmament (Fontanel
1995), military expenditures and growth (Ram 1995), the defense
industrial base (Dunne 1995,
Duncan and Coyne 2013a,b), sanctions (Kaempfer and Lowenberg
2007, Cortright and Lopez
2011), terrorism (Enders and Sandler 1995, Anderton and Carter
2005, Sandler and Arce 2007,
Shughart 2011), civil war (Collier and Hoeffler 2007, Blattman
and Miguel 2010, Fiala and
Skaperdas 2011), insurrections (Grossman 1995) and a variety of
other types of conflict (see
Brauer and Gissy 1997, Hartley and Sandler 2003).
To date, what Buchanan termed the organismic view has dominated
the analysis of
expenditures on, and provision of, state-provided defense. For
example, in his overview of the
economics of military expenditures, Smith (1995: 71) writes that
[t]he standard neo-classical
model of the demand for military expenditures assumes that there
is a national state that
maximizes welfare which includes, among other variables,
security. Dunne (1995: 409) notes
that the neoclassical approach to military expenditureis based
on the notion of a state with a
well defined social welfare function, reflecting some form of
social democratic consensus,
recognizing some well defined national interest, and threatened
by some real or apparent
potential enemy. Finally, in a stocktaking of the economics of
defense and peace field, Fisher
and Brauer (2003: 225) indicate that researchers model military
expenditure as a variable that
enters a security function which, in turn, enters a social
welfare function. In contrast, the
individualistic view has been more prevalent in the treatment of
such topics as revolution,
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terrorism, coups, and non-state actors. Unlike the expenditure
and provision side of defense,
these topics are typically modeled and analyzed in terms of
individual choice subject to a variety
of context-specific constraints.
My focus is on the state provision of defense, specifically the
dominant assumption of a
defense brain. I argue that the defense brain needs a lobotomy.
A lobotomy is a neurosurgical
procedure in which the nerve fibers in the frontal lobe of the
brain are severed to form new
patterns and rid a patient of delusions, obsessions, nervous
tensions and the like (Kaempffert
1941: 18). Indeed, the dominance of the organismic framework has
resulted in the modeling of
defense as a pure public good provided by a benevolent and
all-knowing state in optimal
quantities and qualities. This assumption is conducive to
modeling the state provision of defense.
It is also delusional when one looks at how the actual world
operates. By assuming that a
benevolent and omniscient state will provide the optimal
quantity and quality of defense, the
organismic view downplays, or altogether neglects, the
possibility that scarce resources can be
wasted, manipulated by special interests for their own narrow
benefit, and used to impose real
harms (or bads) on innocent people both domestically and
internationally.
Lobotomizing the defense brain provides the opportunity to
recast defense and peace
economics from the perspective of the individualistic view which
focuses on key decision
makers and the context-specific rules under which they choose.
Emphasis is placed on
comparative institutional analysis to understand how different
contexts influence the epistemic
and incentive aspects of defense-related decision making. My
core point should be elementary
and uncontroversial to economists: those working on defense and
peace economics should apply
the analytical apparatus of their discipline to the actual
institutions and settings in which defense
expenditures and provision take place. However, this seemingly
elementary point needs
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repeating because, as Geoffrey Brennan and James Buchanan (1985)
note, many economists are
locked into the presumption that political authority is vested
in a group of moral superpersons,
whose behavior might be described by an appropriately
constrained social welfare function
(xviii). This is the case with economic treatments of
defense.
The tools I employ for this lobotomy draw from several fields
within economics
including: Austrian economics, constitutional political economy,
new institutional economics,
and public choice economics.1 I critically consider five
assumptions associated with the
organismic view: (1) that defense and security is a pure public
good that must be provided by a
national government (section 2.1), (2) that state-provided
defense is always a good and never a
bad (Section 2.2), (3) that the state can provide defense in the
optimal quantity and quality
(Section 3), (4) that state expenditures on defense are neutral
with respect to private economic
activity (Section 4), and (5) that state-provided defense
activities are neutral with respect to
domestic political institutions (Section 5). Throughout I
emphasize that the individualistic view
provides a superior, alternative framework for understanding
these issues and, hence, reality.
2 Context Matters: Defense as Public and Private, Good
and Bad
2.1 The Ambiguity of Defenses Publicness
1 These fields have not been completely ignored by peace and
defense scholars (see, for instance, Hartley and Sandler 1995: 7,
Hartley 1995, Klingen 2011). However, they have largely remained in
the background while the more traditional neoclassical model of
defense expenditures and provision is in the foreground.
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National defense is the textbook example of a pure public good.
Consider the following from a
well-known public finance textbook which reflects the treatment
of the topic in most economics
texts:
A classic example of a pure public good is national defense.
National defense is not rival because if I build my house next to
yours, my action in no way diminishes your national defense
protection. National defense is not excludable because once an area
is protected by national defense, everyone in the area is
protected: there is no way the government can effectively deny me
protection since my house is in a neighborhood with many other
houses (Gruber 2011: 183).
From this premise, it is concluded that government must provide
defense which will be severely
underprovided on the private market. This, in turn, serves as
the justification for government
taxation and expenditure for the provision of defense at the
national level. Textbooks typically
end the discussion at this point. Defense and peace scholars who
model defense expenditures go
a step further by assuming that a defense brain provides the
optimal level of defense in the most
efficient manner possible.
However, when one replaces the organismic view with the
individualistic view, the
problem situation changes. The individualistic view appreciates
the context within which
defense-related goods and services are provided and the
implications this has for the varying
private-public characteristics of the wide range of
defense-related goods.
In his critique of public goods theory, Tyler Cowen (1985)
emphasizes that the traditional
treatment of public goods takes place in an institutional vacuum
devoid of context. Instead of
treating publicness and privateness as given and fixed
characteristics of goods, he argues
that focus needs to be placed on the context within which a good
is provided and consumed. In
different contexts the same good may be more private or more
public. Cowens insight is
applicable to all economic goods including state-provided
defense.
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Consider, for example, the idea of a national missile defense
shield which is often used to
illustrate the supposed publicness of national defense. The
standard story is that the missile
shield is a public good because it is non-rivalrous and
non-excludable from the standpoint of the
nation. But if one changes the context slightly, a different
outcome emerges. For example, each
individual anti-ballistic missile is rivalrous and excludable
(Cowen 1985: 56, Hummel 1990,
Hummel and Lavoie 1994: 355). It is rivalrous because the same
missile cannot protect two
geographic arease.g., New York City and Los Angeleswithin the
nation. As Rothbard
(1962: 1032-1033) notes, national defense is surely not an
absolute good with only one unit of
supply. It consists of specific resources committed in certain
definite and concrete waysand
these resources are necessarily scarce. A ring of defense bases
around New York, for example,
cuts down the amount possibly available around San Francisco.
Further, the missile is at least
partially excludable because one can, in principle, protect
paying states, cities, or localities while
excluding non-paying locals. This does not mean that each
missile is not semi-public, but, rather,
highlights that the standard pure public good assumption is not
nearly as clear when context
changes.
When discussing defense, most economists use the adjective
national to qualify the
scope of defense. However, by assuming that the marginal unit is
broadi.e., national
economists bias their analysis in the direction of concluding
that defense is a pure public good.
Cowen (1985: 57) argued that when most economists discuss the
goods that are traditionally
labeled public (e.g., national defense, roads, etc.) they
usually take a very broad definition of
the marginal unit. When private goods are discussed,
institutions are ignored in a similar
manner by considering a very small marginal unit. However, when
one considers the
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constituent parts of a countrys defense, it becomes clear that
many defense-related activities
take place at the sub-national level, not the national
level.
Consider, for instance, that the U.S. government operates a
massive bureaucratic
apparatusThe Department to Homeland Security (DHS)whose sole
mission is to secure the
nation from the many threats we face.2 From a broad perspective,
the DHS provides national
defense, a pure public good, but many of the actual activities
of the DHS are semi-private. For
example, information gathering and sharing, as well as the
protection of critical infrastructure,
may have semi-public characteristics, but they are rivalrous and
excludable, at least to some
degree.
Appreciating that defense is not solely a national good opens up
the possibility that the
diverse goods and services that constitute what is called
national defense may be provided at a
variety of sub-national levels and units.3 Further, these units
can be public or private depending
on the context. For example, following the 9/11 attacks, public
awareness by private citizens
increased dramatically. This private surveillance, and
resistance in the case of attempted attacks,
has led to the thwarting of at least two attacks in the U.S.the
attempted shoe bombing in
2001 and the attempted underwear bombing in 2009 (see Mueller
and Stewart 2011: 79-80).
This is an example of defense provided by private citizens. A
narrow view of defense and
security as something solely provided by the state at the
national level overlooks, or altogether
ignores, these types of sub-national activities by private
actors.
2 http://www.dhs.gov/about-dhs. 3 Interestingly, defense and
peace scholars have recognized a variant of this point in the
theory of alliances. The original public good model (see Olsson 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.
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2.2 Public Bads
Ignoring the context within which defense is provided also
neglects the possibility that defense is
a public bad (see Ellsberg 1969, Mendez 1997, Coyne and Davies
2007). While the provision of
defense may be a good for some people, it can simultaneously be
a bad for others. Alternatively,
while the initial provision of defense to protect citizens may
be viewed as a public good, it can
generate outcomes that are, in reality, bads. Coyne and Davies
(2007: 37) catalog twenty
potential public bads associated with defense and foreign
intervention and conclude that [s]ingle
actions and particular consequences cannot be evaluated in
isolation of concomitant actions and
consequences. It is simplistic and utopian to imagine that an
interventionist apparatus and polity
can act only in the good cases and avoid the concomitant bads.
These bads can occur
domestically or internationally. I will discuss the former in
more detail in Section 5 so I will
focus mainly on the international case here.
In artificially limiting their focus to the national level,
economists neglect the broader,
global effects of government-provided defense.4 Even if we
assume that defense is a pure public
good at the national level, a more global view suggests that
defense expenditures by one nations
government constitute a public bad for the members of other
nations. While expenditures on
defense may make one nations citizens more secure, these same
investments make the citizens
of other countries less secure, all else constant. This implies
that, from a more global perspective,
defense is a public bad since each individual society needs to
invest in defense precisely because
others invest in defense. William Nordhaus (2005: 4) captures
this point when he writes,
4 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.
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Countries without military capability cannot easily undertake
wars of choice or wars whose
purposes evolve, as [the U.S. has] in Iraq
Many activities that fall under the purview of defense for an
individual country entail
actively harming the citizens of another country. This can occur
directlye.g., dropping a
nuclear bomb on citizens of a countryor indirectly. As an
example of the latter, consider that in
2011, the Central Intelligence Agency (CIA) introduced a fake
vaccination clinic in the town of
Abbottabad, Pakistan, where they believed Osama Bin Laden was in
hiding. The hope was that
the U.S. government would be able to secure the DNA of his
children to confirm his location and
kill him (see McNeil 2012). Once revealed, this program
contributed to a backlash against
vaccines and vaccinators which was a contributing factor to an
increase in the prevalence of
polio after years of decline (Moisse 2014). As this example
illustrates, what may be viewed as a
(potential) public goodin this case international defense
operations of the U.S.can be a
public bad to otherscitizens in Pakistan and the other countries
incurring the cost of a greater
prevalence of polio, and the aid workers who are now being
murdered, since they are viewed as
part of a covert conspiracy by foreign governments.
A key part of this issue is the use of the term defense which is
fundamentally
misleading. Defense suggests a passive act of protection from
foreign threats. It implies that
defense expenditures are used purely in a responsive manner to
resist outside attacks. However,
what constitutes defensee.g., weapons, arms, equipment,
intelligence, torture, human capital
in force and social control, etc.are all technologies that lower
the cost of governments
controlling and harming others. While these technologies can be
used for purely defensive
purposes, they can also be used for offensive purposesto start
wars and conflicts and engage in
murder and exploitation. As Hummel and Lavoie (1994: 356)
indicate, [h]istorically, the state
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has often embarked on military adventures unrelated to the
defense of its subjects. If this were
not the case, people would require no protection from foreign
states in the first place. Similarly,
Nordhaus (2005: 4) reminds us that [t]he last five major wars
that the United States undertook
(Korea, Vietnam, Kuwait, Afghanistan, and Iraq) were ones in
which the U.S. attacked countries
that had not directly attacked the United States. The use of
defense technologies for offensive
purposes is not limited to international instances. Many
governments use military force and
tactics not to defend the person and property of their domestic
populations, but rather as a tool of
direct and indirect social control. This dynamic can even emerge
in constitutionally-constrained
states as I will discuss in Section 5.
Taken together, this suggests that defense and peace scholars
need a more nuanced
understanding of what constitutes defense. Models which neglect
context overlook both the
ambiguity of the publicness of defense and the possibility that
defense can be a bad. In assuming
that defense is a good, economists tend to overemphasize the
public benefits of state-provided
defense while deemphasizing, or altogether neglecting, the
associated bads. This is especially
problematic in the realm of foreign policy, since incorrect
analysis, and the policies that emerge
from them, imposes real costs on often innocent human
beings.
3 The Problem of Demand Revelation and Efficient
Provision
One implication of assuming that defense is a pure public good
is that it will be severely
underproduced absent government provision. From the perspective
of the organismic view, the
solution to this market failure is a straightforward applied
maximization problem. In order to
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provide the optimal amount of defense, the defense brain
vertically sums the individual demand
curves of the members of society. After calculating this total
market demand and charging
people according to their willingness to pay, the state then
allocates the appropriate expenditures
to provide optimal defense for its citizens. The result is that
the nations security function, which
is one component of broader social welfare, is maximized.
In practice, however, things are not so simple because
individual demands are not predetermined and given to government
decision makers. Optimal government provision of
public goods faces three issues which are well known in public
finance (Gruber 2011: 187, 219).
First there is the issue of preference revelation which refers
to the fact that consumers may not
reveal their actual valuation of defense. Since the amount each
individual will be charged is
equal to their stated willingness to pay, they have an incentive
to understate their true value of
the good or service. Second, there is the issue of preference
knowledge, where consumers may
not know their valuation of defense even if they have an
incentive to honestly reveal their
willingness to pay. How likely is the average citizen to have an
accurate gauge on how much
they value defense as a general category, let alone how much
they value each individual
component of the complex array of goods and services that
constitute this broad category? The
third issue is one of preference aggregation which refers to the
difficulty of government
combining individual preferences across all citizens into a
meaningful social value to provide the
optimal amount of defense.
Taken together, these three issues make Lindahl pricing, whereby
individuals honestly
reveal their preferences and government charges them a price
according to their marginal
willingness to pay, an unlikely mechanism for optimal provision
of public goods even if one
assumes a completely benevolent government. Economists have
attempted to derive mechanisms
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to overcome the problem of demand revelation, but none of the
existing solutions are feasible.
As Hettich and Winer (2005: 134, fn. 2) indicate, It is possible
to find a special tax scheme that
will overcome the preference revelation problem under certain
conditions, such as the Clark-
Groves and Ledyard-Groves mechanisms...However, none of these
schemes appear to be a
practical method of financing a modern public sector.
This has important implications for the way we model and analyze
state-provision of
defense. With no clear solution to the aforementioned problems,
there is no reason to be
confident that government production of defense can achieve
Pareto optimality. It is possible for
the government to provide more total defense than otherwise
would have existed by simply
spending more taxpayer money to produce more defense-related
outputs. But this is a different,
and much weaker, claim than saying that government can provide
the social welfare-maximizing
level of defense. Further, simply providing more defense
relative to what would otherwise exist
is not necessarily beneficial, as government overprovision
creates inefficiencies as well. Murray
Rothbard (1981: 543) captures these issues with government
provision of public goods when he
writes:
What criterion can the State have for deciding the optimal
amount and for gauging by how much the market provision of the
service falls short? Even if free riders benefit from collective
service X, in short, taxing them to pay for producing more will
deprive them of unspecified amounts of private goods Y, Z, and so
on. We know from their actions that these private consumers wish to
continue to purchase private goods Y, Z, and so on, in various
amounts. But where is their analogous demonstrated preference for
the various collective goods? We know that a tax will deprive the
free riders of various amounts of their cherished private goods,
but we have no idea how much benefit they will acquire from the
increased provision of the collective good; and so we have no
warrant whatever for believing that the benefits will be greater
than the imposed costsAnd what of those individuals who dislike the
collective goods, pacifists who are morally outraged at defensive
violence, environmentalists who worry over a dam destroying snail
darters, and so on? In short, what of those persons who find other
peoples good their bad?
Similarly, Albert Breton (1998: 50) notes:
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It would be disingenuous, to say the least, in an exercise whose
object is to discover how demand is revealed, to assume that, ex
ante, centers of power know the preferences of consuming
households. We must then begin our analysis of the forces that
motivate citizens to reveal their preferences by focusing on a
fundamental information problem. I therefore assume that as a
consequence of imperfect information concerning the preferences of
citizens, centers of power will provide, except by accident, goods
and services in quantities that will be either larger or smaller
than the quantities desired by consuming households at the
taxprices they confront, and I show that these departures from
optimality inflict utility loses on these households.
None of these insights should be new or novel to economists. But
they have important
implications for the way that we do defense and peace economics.
If our goal in studying the
economics of defense is to understand the realities of defense
provision, then assuming that
defense is a pure public good and that a benevolent and
omniscient state will provide the optimal
amount to maximize social welfare is a nonstarter.
The individualistic view offers a superior alternative for
understanding state-provided
defense because it does not assume away that which needs to be
explained. From this
perspective, the state is not assumed to maximize anything.
Instead, individuals within the
system maximize their own well-being subject to the constraints
created by the political rules
within which they act. The individualistic view seeks to
understand what happens when
economic knowledge, which is generated through private exchange
in markets, is replaced by the
process of political exchange. The outcomes of political
exchange emerge from the interactions
between four key categories of actors who are assumed to pursue
their own interests as follows:
1. Voters who are characterized by rational ignorance and must
vote over bundles of goods, of which defense is one aspect, at
infrequent time intervals.
2. Organized interests who seek to concentrate benefits to the
members of their group while dispersing costs on non-member
taxpayers.
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3. Elected officials at all political levels who seek to
maximize their votes and legacy and
who are not legally bound by political promises.
4. Bureaucrats who, absent the profit/loss motive, seek to
maximize their discretionary budget and number of subordinates
under their control.
The specific interactions and incentives faced by those in each
of the categories will vary
depending on the context. Only by applying this framework can we
understand the actual
demand for, and allocation of, military expenditures within a
society and the logic behind
government decisions to employ and utilize military force.
To provide one illustration of how the individualistic view is
superior to the organismic
view for understanding the realities of state-provided defense,
consider the issue of waste.
Anyone who has spent any time studying the military procurement
process can appreciate the
prevalence of often significant waste and inefficiencies. As
Robert Higgs (2006a: 176) writes, in
the U.S., a great deal of the [defense] budget is eaten up by
items that masquerade as defense
but actually make little or no contribution to national
security. Many of the spending incomes
are, in effect, welfare programs which go to specific interest
groups, bureaucracies, and
corporate recipients. Similarly, David Walker, the former
Comptroller General of the United
States, noted that DODs numerous business management weaknesses
continue to result in
reduced efficiencies and effectiveness that waste billions of
dollars every year (U.S.
Government Accountability Office 2006: 2). Specific examples of
waste abound (Easterbrook
2010, Coburn 2012), ranging from the A-7, A-10, and T-46
aircraft programs (Higgs 2006a: 176-
184), to the Block 30 version of the Global Hawk drone (Sia and
Cohen 2014), to the
refurbishing of tanks that the U.S. military no longer wants or
needs (see Censer 2014). Other
reports indicate significant waste in ordering and storing
excess spare military parts (U.S.
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Government Accountability Office 2010) and the inability of the
Department of Defense to
maintain basic accounting resulting in millions of dollars of
uncollected debt (Department of
Defense Inspector General. 2011).
Waste is a non-issue for the organismic view because it is
assumed away from the start.
Discussing the implications of the neoclassical approach to
defense spending, Dunne (1995: 409-
410) highlights that In this approach the DIB [Defense
Industrial Base] would simply be
determined as the most efficient way of producing the optimal
level of security. Under this
scenario, there can be no waste. Voters are well-informed and
their preferences are aggregated
into a consensus. Elected officials, working in conjunction with
publicly-spirited bureaus and
agencies, benevolently implement this consensus to maximize
social welfare. Further, there are
no interest groups that influence and manipulate state-provided
defense for their own narrow
benefit. None of this explains the realities of state-provided
defense and, instead, biases the
analysis by assuming the superiority of government provision
from the outset.
Three implications emerge from studying defense from the
individualistic view. First,
there is no reason to believe that the most efficient
technologies will be funded or adopted. This
is evident in the post-9/11 period where only one government
anti-terrorist initiativethe
reinforcement of cockpit doorspasses a cost-benefit test
grounded in the most favorable
assumptions toward the government programs (see Mueller and
Stewart 2011). Second,
technological lock-in will be prevalent, whereby technologies
that have been revealed to be
inefficient continue to be utilized. This lock-in may occur due
to some combination of
bureaucratic inertia and vested interests who benefit from the
persistence of inefficient
technologies. Nordhaus (2005: 3) provides an illustration of
this dynamic when he writes that
[b]allistic missile submarines (BMS) are an interesting example
of strategic and budget inertia.
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The U.S. Navy currently deploys 14 BSMs. There is no plan to
replace them or to retire them.
They have an effective strategic depreciation rate of zero even
as their current strategic
importance has declined to close to zero. Finally, elected
officials, bureaucrats, and special
interests have an incentive to invest in exaggerating threats in
order to expand their control over
resources and power (see Higgs 2006b). This dynamic was evident
following the 9/11 attacks,
when an entire terrorism industry emerged with an incentive to
overstate the terrorist threat in
order to self-perpetuate (see Mueller 2006). Together, these
implications suggest that state-
provided defense is often anything but efficient, optimal, or
welfare-enhancing for citizens.
4 The Parasitic Nature of the Defense-Industrial Base
From the perspective of the organismic view, defense
expenditures are always value added
because the state is modeled as a rational actor, balancing
opportunity costs and security
benefits of military expenditure to maximize a national interest
(Dunne and Tian 2013: 5). The
findings of an existing empirical literature exploring the
relationship between military
expenditures and economic growth casts doubt on this assumption
(see Dunne, Smith and
Willenbockel 2005, Dunne and Smith 2010, Dunne and Uye 2010, and
Dunne and Tian 2013 for
a review and survey). In survey of these findings, Dunne and
Tian (2013: 9) conclude that [t]he
more recent literature is moving toward a commonly accepted, if
not yet consensus, view:
Military expenditure has a negative effect on economic
growth.
The literature posits a number of potential channels through
which military expenditures
can influence growth. For example, military expenditures may
contribute to growth via the
Keynesian multiplier effect or through positive externalities,
such as R&D and human capital
spillovers. At the same time, expenditures may have no effect or
undermine growth by crowding
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18
out private expenditures, reducing other public services, or
affecting the interest rate due to
government borrowing. These theoretical explanations are
typically treated as secondary to the
empirical analysis. As Dunne and Tian (2013: 5) indicate,
[t]heory (should) precede empirics,
but much of economic theory does not assign an explicit role for
military expenditure as a
distinctive economic activity. Consequently, one finds a wide
range of theoretical specifications
in the empirical work. The individualistic view, with its
appreciation for how different rules and
contexts generate different constraints, can clarify the
theoretical relationship between state-
provided defense and the market process.
To begin, consider the distinction between productive and
unproductive economic
activities. Productive activities are positive-sum in that the
parties involved in the exchange are
made better off. These positive-sum activities are at the core
of economic progress and improved
standards of living. In the context of property, prices, and
profit and loss, markets provide the
knowledge and incentive for private actors to reallocate
resources to their highest valued uses.5
The market process approach is not one of perfect markets, but
rather one in which imperfect
human actors engage in discovery through ongoing competition
(see Hayek 1945, 1978; Kirzner
1978: 8-11, 1985, 1997).
In contrast, negative-sum activities entail investing in the
transfer of already existing
resources and oftentimes using these transfers to produce goods
and services which consumers
do not value.6 Negative-sum activities dont just fail to
contribute to improved standards of
living, they actually threaten to undermine progress by
diverting scarce resources away from
5 For more on the role of economic calculation in facilitating
the flow of resources to higher-valued uses see, Mises 1920, 1949;
Hayek 1945; Rothbard 1962; Vaughn 1980; Hoff 1981; Lavoie 1985a,
1985b; Horwitz 1996, 1998; Boettke 1998; de Soto 2010. 6 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).
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19
productive activities. From this perspective, negative
sum-activities are parasitic in that they rely
on, and exploit, the gains from productive activities. As
unproductive activities multiply they
threaten the vitality of the productive economy and can lead to
the decline of nations (Olson
1982). The distinction between productive and unproductive
activities highlights a paradox
regarding state-provided defense.
State provision of defense to protect the person and property of
citizens is typically
viewed as a productive activity because it creates an
environment conducive to positive-sum
activities by private citizens. However, in order to fund the
defense-industrial base, the state
must first engage in the unproductive activity of extracting
resources from the private sector.
Conceptually, the state provision of defense is, on net,
productive as long as the social benefits
exceed the costs associated with the extraction of private
resources. However, as discussed above
(Section 3) determining the optimal level of defense is, in
practice, not possible. Instead,
outcomes will be determined by a political process whereby the
relevant players have an
incentive to maximize expenditures within existing constraints
while actively working to loosen
those constraints to increase future expenditures. The
implication, as Seymour Melman (1974:
63) notes, is that industries and regions that specialize in
military economy are placed in a
parasitic economic relationship to the civilian economy, from
which they take their sustenance
and to which they contribute (economically) little or nothing
(see also Melman 1970). From this
perspective the concern is that state-provided defense will
threaten the dynamism of the very
private economy that it is intended to protect.
Government interventions into private markets distort the
pattern of voluntary exchange
and the structure of production (see Mises 1929, Rothbard 1962,
Kirzner 1978, Ikeda 1997).
These undesirable effects occur due to distortions in the
signals sent to market participants
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20
through prices and perceived profit opportunities. There are two
general channels through which
state-provided defense provision affects the private
economy.
The first is the direct effect whereby existing resources are
transferred from the private
sector to the public sector. Resources used by the government on
defense cannot simultaneously
be used by private citizens. The result is a stifled discovery
process whereby the patterns of
resource use that would have emerge absent the forced transfer
of resources no longer occur (see
Kirzner 1978: 16-18). Of course the counterfactual, what would
have happened if resources
remained in the private sector, is unknowable, but this unseen
cost cannot be neglected in
discussing the overall costs of the defense economy (Duncan and
Coyne 2013a).
In the literature on military expenditures and growth, this
dynamic is typically
characterized as the crowding out effect whereby government
expenditures offset private
expenditures. However, because of the differing epistemic
properties of the private market versus
the political process it isnt accurate to assume that a dollar
spent by the state on defense is
equivalent to a dollar spent in the private sector. In private
markets actors are able to rely on
economic calculation to gauge the opportunity costs of
alternative courses of action. In political
settings the ability to rely on economic calculation is absent.
Political decision makers can
increase defense-related outputs by investing more money in
production, but there is no
mechanism to inform them if they are allocating scarce resources
to their highest-valued uses.
To illustrate the relevance of this distinction, consider
arguments regarding the benefits
of defense-related research and development as contributions to
improved standards of living.
For example, Rutton (2006: vii) argues that military and
defense-related procurement has been a
major source of technology development across a broad spectrum
of industries that account for
an important share of U.S. industrial production. However, from
an economic standpoint the
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21
question is: how would these scarce resources have been used if
the government had not
transferred them from the private sector and allocated them
through the political process?
Proponents of the government spillover argument typically select
instances where government
produced something that was, or is, used in private markets and
point to it as a sign of the
success of government-funded innovation.7 But this misses the
core economic point. Would
anyone deny that if government spends enough money, it will
generate some useful outputs or
technological spillovers? From an economic standpoint, the issue
is determining the opportunity
costs of resource use given an array of technologically-feasible
alternatives. Outside of the
context of the market, there is no way to discover a solution to
this economic problem.
The second channel through which defense provision affects the
private economy is by
creating entirely new profit opportunities beyond the initial,
direct transfer of resources. As
Kirzner (1978: 18) notes, government intervention into the
private economy tends to create
entirely new, and not necessarily desirable, opportunities for
entrepreneurial discovery. As
entrepreneurs pursue these new profit opportunities, they create
new openings for subsequent
entrepreneurs. Holcombe (1998) discusses how [e]ntrepreneurial
ideas arise when an
entrepreneur sees that the ideas developed by earlier
entrepreneurs can be combined to produce a
new process or output (46) and that acts of entrepreneurship
create an environment within
which innovations build on themselves (47). This self-extending
process contributes to
increases in wealth when entrepreneurial activities are
productive.
However, when the activities are unproductive, the same
reinforcing process contributes
to economic stagnation (see Coyne, Sobel, and Dove 2010). As
Olson (1982: 72) indicates,
[t]he growth of coalitions with an incentive to try to capture a
larger share of national income,
7 Kealey (1997) provides an economic analysis of government
funding of scientific research and argues that government-funded
projects are often inefficient and wasteful.
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22
the increase in regulatory complexity and governmental action
that lobbying coalitions
encourage, and the increasing bargaining and complexity of
understanding the cartels create alter
the pattern of incentives and the direction of the evolution of
society. The incentive to produce is
diminished; the incentive to seek a larger share of what is
produced increases. Duncan and
Coyne (2013a: 423) discuss this process in the context of drone
technologies, where
entrepreneurs are currently building on previous innovations and
advances to expand the drone
market domestically and internationally (see also Hall and Coyne
2014).
Yet another well-known manifestation of this dynamic is the
revolving door, which
refers to the movement of people between government
positionslegislative and regulatory
and private industry (see Wedel 2009). The profit opportunities
in the private industry created by
state-provided defense incentivize this movement which can take
place through direct
employment or through consulting contracts. A report by the U.S.
Government Accountability
Office (2008:4) found that In 2006, 52 major defense contractors
employed 86,181 of the
1,857,004 former military and civilian personnel who had left
DOD service since 2001. This
number includes 2,435 former DOD officials who were hired
between 2004 and 2006 by one or
more of the contractors and compensated in 2006 These officials
had previously served as
generals, admirals, senior executives, program managers,
contracting officers, or in other
acquisition positions...
Another report found that, between 2004 and 2008, 80% of retired
three- and four-star
officers relocated to the private defense industry either in
consultant or executive roles (Bender
2010).8 A USA Today report identified 158 retired generals and
admirals who served as
8 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 five-year minimum (for more on
post-employment laws
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23
consultants to the military in their post-retirement as senior
mentors. The report found that 126
had financial ties to defense companies and that 29 were
full-time executives at defense
companies. (Brook, Dilanian, and Locker 2009). These former
military officers are valuable
assets to private firms because of their knowledge of the
intricacies of state-provided defense,
including an understanding of the bureaucratic nuances. They
also maintain connections to
members of the media and key decision makers within government
agencies.
The overarching concern is that by reducing transaction costs,
the revolving door
facilitates the pursuit of narrow self-interest by those in
private defense industry and government.
While, at least rhetorically, state-provided defense is intended
to protect the public interest, the
actual result is benefits concentrated on a narrow group of
well-connected individuals while
costs are dispersed on taxpaying citizens under the facade of
providing them with protection
from external threats.
It is not simply a matter of private firms influencing passive
government agencies. In
stark contrast, government agencies actively shape the
trajectory of the defense-industrial base in
two ways. The first is through industrial policy and regulation.
Private defense firms become
dependent on the state for financing and lose, at least to some
extent, autonomy of their
operations and output. This dynamic was at work during World War
II when the government
socialized a significant portion of the countrys industrial
investments and, in doing so, assumed
control over many aspects of industrial production (see Hooks
1991, Higgs 2006: 81-100).
Hooks (1991: 125) notes that during World War II, [t]he military
bureaucracies were able to
direct the mobilization by exerting control over the investment
processThe massive industrial
expansion directed by the military and the closely intertwined
procurement program defined the
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).
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24
logic and content of the mobilization. Even after demobilization
this influence continues
through the persistence of a permanent war economy where
governments expenditures for war
(or national defense) become a legitimate and significant
end-purpose of economic activity
(Oakes 1944: 12).
The second way that government agencies influence the
defense-industrial base is by
actively taking steps to create demand for their programs and
activities.9 Woll (1977: 194)
indicates, [t]he ability of administrative agencies to marshal
support in favor of particular
programs is often severely tested, and as a result the agencies
have frequently created public
relations departments on a permanent basis to engineer consent
for their legislative proposals.
According to an Associated Press investigation, the Pentagon
spent $4.6 billion during the 2009
year on advertising which includes public relations (domestic
and international) and recruitment.
It also employed 27,000 people dedicated to these tasks. To put
this number in perspective, the
State Department employed a total of approximately 30,000 people
in that same year (Associated
Press 2009). To the effect that this political advertising is
effective, it generates demand for
existing, and subsequent, Pentagon activities.10
Taken together the two channels provide theoretical insight into
the parasitic nature of
state-provided defense. By shifting resources from the private
market to politics, the desirable
epistemic features of the competitive market process are crowded
out and replaced by the
political process which is unable to solve the core economic
problem of discovering the best use
of scarce resources. Further, a series of subsequent, and
entirely new, unproductive opportunities
arise which reinforce and extend this process of transferring
resources and crowding out market-
generated knowledge.
9 See Wagner 1966, DiLorenzo 1988, and Boettke and Coyne 2009
for a discussion of political entrepreneurship and how it differs
from market entrepreneurship. 10 For more on the political economy
of public advertising see Wagner 1976.
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25
In assuming that the state provides the optimal level of
defense, the organismic view
neglects the perverse influence of the military-industrial
complex on the provision of defense.
This is a mistake given that this complex is not a bug, but
rather a feature of a system where
government monopolizes defense provision and contracts
exclusively with a narrow range of
producers in the private sector to supply goods and services.11
As Walter Adams (1968: 655)
writes,
The [military-industrial] complex is not a conspiracy between
the merchants of death and a band of lusty generals, but a natural
coalition of interest groups with an economic, political, or
professional stake in defense and space. It includes the armed
services, the industrial contractors who produce for them, the
labor unions that represent their workers, the lobbyists who tout
their wares in the name of free enterprise and national security,
and the legislators who, for reasons of pork or patriotism, vote
the sizable funds to underwrite the show. Every time the Congress
authorizes a military appropriation, it creates a new constituency
(i.e., propaganda machine) with a vested interest in its
perpetuation and aggrandizement.
With its focus on individual choice within the context of
specific rules, the individualistic view
provides a means of not only appreciating these dynamics, but of
analyzing the various
connections involved in state-provided defense and the, often
perverse, outcomes emerging from
these relationships.
5 The Scale and Scope of the State
Defense and peace scholars have almost exclusively focused their
attention on the scale of the
state as it relates to defense. Scale is typically measured in
terms of total military expenditures or
11 Defense and peace scholars are well-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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26
military expenditures as a percentage of GDP. In narrowly
focusing on quantitative measures of
government scale, however, the issue of scope has been
neglected.12 While scale refers to the
size of the state, scope refers to the range of activities
undertaken by government. James
Buchanan (1975: 163) recognized the important distinction
between scale and scope when he
noted that, [a]n interfering federal judiciary, along with an
irresponsible executive, could exist
even when budget sizes remain relatively small.
If the purpose of state-provided defense is to protect citizens,
however, then focusing
solely on issues of scale while neglecting issues of scope is
problematic. A central concern is that
the state tasked with providing defense may use its power to
coerce the very citizens it is
supposed to protect. This concern is part of the broader paradox
of government which refers to
the problem of simultaneously empowering the state while
designing constraints so that those in
government cannot abuse those powers (see Buchanan 1975;
Buchanan and Brennan 1985;
Weingast 1995; Gordon 2002).
The typical proposed solution to resolve this paradox is the
establishment of constraints
on the state so that government actors can only use their powers
for productive purposes.
However, these constraints are not perfectly binding, and
domestic political institutions are not
neutral to the use of state-provided defense. The recognition
that state-provided defense can
undermine domestic political institutions has a long history in
political philosophy. Writing in
1795, James Madison (1865: 491) noted that
Of all the enemies to public liberty war is, perhaps, the most
to be dreaded, because it comprises and develops the germ of every
other. War is the parent of armies; from these proceed debts and
taxes; and armies, and debts, and taxes are the known instruments
for bringing the many under the domination of the few. In war, too,
the discretionary power
12 One important exception to this is Robert Higgs (1987, 2004,
2005, 2007, 2008a,b, 2012) whose explanation for the growth of
government recognizes the interconnection between the scale, scope,
and power of state activities.
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27
of the Executive is extended; its influence in dealing out
offices, honors, and emoluments is multiplied; and all the means of
seducing the minds, are added to those of subduing the force, of
the people No nation could preserve its freedom in the midst of
continual warfare.
Similarly, Alexis de Tocqueville (1847: 285) indicated that,
[a]ll those who seek to destroy
the liberties of a democratic nation ought to know that war is
the surest and the shortest means to
accomplish it. War, Madison and Tocqueville warn, poses a
genuine threat to the nature of
domestic political institutions by increasing not only the scale
of government, but also the scope.
Higgs (1997, 2006a) documents how the scope of government power
can increase in the
economic sphere during times of war and crises. Expansions in
scope can occur in a variety of
ways including: direct controls over price and quantity, forced
reallocations of labor toward
certain industries, the formation of new agencies and boards to
regulate economic activity, and
the socialization of investment by the government to achieve
certain, predetermined ends. In
each instance the government expands its portfolio of activities
by widening the scope of its
effective authority over economic decision-making (Higgs 1987:
62). Increases in the scope of
government powers are not limited to the economic sphere. Table
1 provides a selection of
instances in U.S. history where the scope of government power
increased during or after war,
resulting in a reduction in citizens civil liberties (see also
Rehnquist 1998, Hummel 2012).
INSERT TABLE 1 HERE
These examples illustrate Hayeks (1981: 124) warning that
emergencies have always been
the pretext on which the safeguards of individual liberty have
been eroded and the scope of
government powers expanded.
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28
There has been some work by economists exploring the mechanisms
and conditions
under which state-provided defense affects the scope of domestic
government. Higgs (1987)
develops a theory of the ratchet effect, whereby government
grows during times of crisis due to a
demand from citizens to do something. For Higgs, the size of
government is a broad category
that includes both the scale and scope of government. Growth in
government can come from
increases in direct expenditures, or from expansions in the
scope of government control over
domestic economic activities. For example, during World War II
the U.S. government
implemented an array of price and rationing controls and
utilized conscription, increasing the
scope of its control over economic and labor markets.
Retrenchment takes place following the
crisis, but the post-crises size of government remains larger
than what would have emerged
absent the crisis.
The permanent increase in the post-crisis size of government can
be explained through
several channels. Bureaus and vested interests, which benefited
from the crisis, have an incentive
to perpetuate and expand their activities post-crisis. Higgs
also emphasizes the role of ideology
by noting that crisis can affect the attitudes of key categories
of peoplee.g., citizens,
policymakers, the judiciary, etc. Some of these people lose
their faith in the prior way of doing
things and are open to changes which, in the pre-crisis period,
may have seemed radical or
unthinkable. Others become normalized to the states crisis-time
activities which, no longer
considered extreme, become a regular part of daily life. As a
result, many people are likely to
learn to like, or at least to tolerate without active
opposition, socioeconomic and political
arrangements that appeared in the beginning to be unavoidablebut
assuredly temporaryevils
necessitated by a great social crisis (Higgs 1987: 72). In
subsequent work, Higgs (2004, 2005,
2006a, 2007, 2012) has applied this logic to a variety of
historical and current events.
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29
Building off of Higgss work, Coyne and Hall (2014b) develop a
theory of the
boomerang effect of foreign interventions. This theory posits
that foreign interventions serve as
an opportunity for domestically-constrained governments to
experiment, in a largely
unconstrained manner, with new forms of social control over
distant populations. Since
constraints on government are weaker abroad than at home, they
can experiment with forms of
social control that would not be acceptable domestically. Under
certain conditions, these
innovations in state-produced social control may be imported
back into the intervening country.
Coyne and Hall identify three related channels through which
foreign interventions may
boomerang back to the intervening country: (1) changes to the
human capital of those involved
in the foreign intervention, (2) changes to the administrative
dynamics of domestic political
institutions, and (3) changes to the physical capital available
to the state for social control. These
factors, combined with the centralization that is characteristic
of foreign interventions (see Porter
1994), can lead to an expansion in the activities of the
domestic national government, reducing
the freedoms and liberties of domestic citizens.
This framework can be used to explain a variety of historical
and current events
including: the rise of the national security apparatus in the
U.S. (Coyne and Hall 2014b), the
militarization of police in the U.S. (Coyne and Hall 2014b) and
the domestic use of drones in the
U.S. (Coyne and Hall 2014c). The more general implication is
that the provision of what at
first might appear to be productive state activities (e.g.,
national security and defense) may
actually be predatory and unproductive by undermining domestic
citizens liberty and freedom.
Even if the scale of government does not grow, foreign
interventions can cause the scope of
government activities at home to expand in an undesirable manner
(Coyne and Hall 2014b: 20).
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30
There are three potential reasons why so few economists have
bothered with the issue of
scope as it relates to state-provided defense. First, it is
assumed that the scale of government and
the scope of government are correlated. From this perspective,
focusing on the scale of
government captures the scope of government activities. However,
as Higgs (2008b) notes, [a]
modern government is not a single, simple thing. It consists of
many institutions, agencies, and
activities and includes many separate actorslegislators,
administrators, judges, and various
ordinary employees Because government is complex, no single
measure suffices to capture its
true size. This suggests that focusing narrowly on aggregated,
quantitative measures of scale
will overlook important issues of scope.
Second, compared to the scale of government, the scope of
government is difficult to
measure quantitatively. As Buchanan (1975: 163) writes, [i]t is
more difficult to measure the
growth of Leviathan in these [scope] dimensions than in the
quantifiable budgetary dimensions
of the productive state. The implication, however, is not to
ignore issues of scope, but rather to
apply alternative methods to trace the history and relationship
between state-provided defense
and changes in the scope of government activities.
Third, the dominant organismic view renders issues of scope
irrelevant. Under this view,
the defense brain is assumed to be doing exactly what is
necessary to maximize social welfare,
nothing more and nothing less. If this is the case, there is no
need to be concerned with what
specific activities the state is undertaking. The
individualistic view, in contrast, focuses on how
existing rules constrain, or fail to constrain, the relevant
decision makers who control the various
aspects of defense provision. It appreciates the paradox of
government and the ongoing tension
between government power and domestic liberty. It recognizes
that state-provided defense is not
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31
necessarily welfare-enhancing and can even undermine and erode
the very institutions it is
intended to support and protect in the first place.
6 Conclusion
Much of what I have said should not be novel to those with an
understanding of economics. But,
as Dr. Johnson (1825: 10) once said, men more frequently require
to be reminded than
informed. My goal has been to remind economists that they should
apply the tools of their trade
to the real-world institutions and settings within which defense
provision takes place. Doing so
has important implications for both pedagogy and for
scholarship.
As educators, economists do a disservice to students by teaching
them that state-provided
national defense is a pure public good that must be provided by
the nation state to solve a market
failure. This misses the opportunity to have a more nuanced
discussion about the role of context
in determining the public and private characteristics of a good.
Also missed is the opportunity to
introduce students to the concept of public bads which may occur
both domestically and
internationally. Finally, such an approach gives students the
false sense that morally-superior
super persons are making decisions about defense provision. The
alternative is to demand that
students apply the economic way of thinking consistently and
persistently in all matters,
including the state provision of defense.
As scholars, our goal is to understand state-provided defense in
the actual world. In
assuming that defense is a pure public good provided in optimal
quantities by a benevolent and
omniscient state, the dominant organismic view is a convenient
modeling strategy, but one that
contributes little to achieving this goal. Economists need to
lobotomize the defense brain and
reorient the study of defense on the foundation of the
individualistic view. This shift will allow
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32
economists to apply their analytical apparatus to understand how
different contexts influence all
aspects of defense provision.
Given what is at stake in terms of human well-being,
understanding the limits and costs
of state-provided defense is just as important as understanding
its potential benefits, if not more
important. An accurate accounting of these costs and benefits
can only take place when the
romantic blinders of the organismic view are removed, to be
replaced by an appreciation for the
constraints and incentives at work in the state provision of
defense. Given their inclination
toward the individualistic view, scholars working in the areas
of Austrian economics,
constitutional political economy, new institutional economics,
and public choice economics are
in a unique position to make important contributions to the
study of real world defense and
how it facilitates, or retards, societal cooperation and the
wealth of nations.
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33
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