Defense Spending and the Civilian Economy
RAND CORP SANTA MONICA CA
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Defense spending generally constitutes a burden on the civilian economy. Because maintaining a defense capability necessarily requires that resources be diverted from civilian to military uses, reductions are necessary either in the total supply of goods and services for current civilian consumption or in the investment necessary to support future civilian consumption. In market economies, prices reflect the opportunity costs of resources--the potential value of using them for other purposes. The economic burden of defense spending, then, can generally be estimated by the total defense budget, since this reflects the value of civilian goods forgone because resources were allocated to defense. In some circumstances, though, defense spending may generate benefits for the civilian economy in addition to whatever contributions it makes to national security. These benefits may partially offset the burdens imposed by defense spending on the civilian economy, and the defense budget may in these cases reflect an overestimate of the true social costs of defense programs.
- Economics and Cost Analysis
- Civil Defense