Saturday, September 17, 2011

Defense is a Public Good. So spend less on it.

When economists talk about something being a "public good" they don't mean "nice stuff that the government does."

The definition of a public good is something that is non-rivalrous and non-excludable. Or in non-econogeek-speak, stuff that doesn't run out no matter how many people use it, and stuff that benefits everybody whether they pay for it or not.

National defense is a public good. I'm not saying all national militaries are "good" -- I think lots of militaries around the world are evil and the world would be a better place without them. But the idea of national defense is a public good-- assuming you're pretty happy with your government and don't want Foreign Invaders to take over your country, everybody benefits from a national military standing guard and keeping you safe. And assuming the Foreign Invader Threat doesn't grow as your population grows, the same military can protect 100 thousand people as easily as it can protect 100 million.

National defense is non-excludable and non-rivalrous.

One funny thing about public goods is since they're non-rivalrous, you can serve more and more people while spending the same amount of money. But we don't do that; we spend more and more money on the military. In all the debates about "cutting" military spending the most radical proposals still keep spending at some constant percentage of GDP.


We should be able to get the same level of safety from Foreign Invaders with a constant level of military spending, no matter how large our population or economy grows. We'd all be much better off, and much safer, if we cut military spending by 90% and spent the money on just about anything else.


Misha said...

I wonder why so few people in this country think the same common sense about military spending ...

Joseph said...

Have you see the National Strategic Narrative document by "Mr Y" (senior "rogue" military folks)?

Gavin Andresen said...

Thanks Joseph, I hadn't run across the National Strategic Narrative; if I were King I'd make it the Official Narrative tomorrow.

Is it getting any traction with Republicans? I don't see any right-leaning endorsements on the first few pages of Google search results.

I'm trying to argue that IF you can agree that public goods should get less expensive over time, THEN both left and right should be able to agree that the budget for things that are public goods should not automatically grow.

(I wonder what the favorite public good of lefties is... clean air maybe?)

I realize that'll never happen, but a boy can dream.

Anonymous said...

Last week Mitt Romney told students at the Citadel that he would increase spending on defense from current levels, a statement that seemed a bit startling to me.

Instead the media stays fixated on Mormonism.

Rich Morse

Joseph Moroco said...

Brilliant. I'll be stealing this with attribution unless there is an objection.

Anonymous said...

1. "And assuming the Foreign Invader Threat doesn't grow as your population grows" - That's a strong assumption that I'm not sure holds up. Arguably, the more powerful the country the more an invader has to gain by attacking it, so he is likely to amass more resources for an attack.

2. The bigger the country, the more it has to lose from an invasion, so it will want to further reduce the chance of being successfully attacked.

3. The more wealthy the country, the smaller is the marginal utility cost of spending an extra $1 on defense.

All these suggest that military spending should indeed scale with some metric of the country's size. The scaling of the optimal spending isn't necessarily linear, though.


Aaron said...

Anonymous/Meni -

There are some problems with your argument

1. It's really not that big of an assumption. The more powerful a country is the more an invader has to gain? More like the less wise it would be to invade.

For one thing, we will still have military intelligence and national security agencies. We will know very quickly if someone is planning on invading us. Also, no country in the world has the military power to risk invading the United States. We would win. That isn't arrogance, that is a fact.

What I would argue is that at the very least you should acknowledge that the size of our military should reflect the threat of invasion. Right now we probably have far more military resources than we would need to repulse an invasion by Russia and China and India combined. More to the point, no one, and I mean no one, is going to try to invade us.

If we cut our military by half, which I'm not suggesting we do, there still wouldn't be anyone who could successfully invade the United States. And there simply isn't anyone crazy enough to try these days.