Market-Provided National Defense

June, 2016

Newhard (2016) challenges our argument, according to which the inefficiency of market-provided national defense is an empirical question rather than a logical implication of the fact that privately provided national defense confronts a free-rider problem. We show that his argument holds only under the assumption that private contributions to public goods depend exclusively on the material benefits individuals expect to reap from such contributions. Empirically, this assumption is false. When private contributions to public goods do not depend exclusively on the material benefits individuals expect to reap from such contributions, the efficiency or inefficiency of market-provided national defense is, as our argument maintained, an (unanswered) empirical question. 

The Political Economy of Foreign Intervention

October, 2015

This chapter highlights the insights that the Austrian tradition brings to the analysis of foreign intervention. Foreign intervention is the use of the discretionary power of a government in one society to address the perceived problems in foreign societies. As such, the attempt to exercise top-down government authority, even with the most noble of intentions, will ultimately face problems similar to those faced in all types of central planning. The limits of human reason and the planner’s ability to engage in rational constructivism apply as strongly abroad as they do domestically. This chapter lays out those limitations and encourages a note of caution in attempts to intervene abroad.

The Oxford Handbook of Austrian Economics is available through Oxford University Press.

Editors: 
People: 
Christopher Coyne
People: 
Peter J. Boettke

The Revolving Door and the Entrenchment of the Permanent War Economy

August, 2015

This paper analyzes the “revolving door” phenomena in the military sector in the US. The revolving door refers to the back-and-forth movement of personnel between the government and private sector. We examine the structure of the revolving door and explain how its very nature leads to the perpetuation of the permanent war economy. This analysis yields several important implications. First, the dynamics of the revolving door shape the military-industrial complex in a way that serves the narrow interests of select elites rather than the broad interests of citizens. Second, because the perverse incentives are a product of the institutional structure of the US military sector, the negative consequences are also structural and cannot be solved by increased oversight.

Competition for Antitrust: The National Civic Federation and the Founding of the FTC

February 3, 2015

Regulation by the state can benefit or harm any business in society. While the market provides for consumers rather than special interests, rationally acting interests will be incentivized to use political means to capture rents, particularly if public clamor for regulation exists. The formation of the Federal Trade Commission, rather than providing a check on business interests, follows the pattern of regulatory capture. The National Civic Federation, a group with strong business interest ties, was crucial to ensuring this outcome at the commission’s founding.

The Revolving Door and the Entrenchment of the Permanent War Economy

January 10, 2015

This paper analyzes the “revolving door” phenomena in the military sector in the United States. The revolving door refers to the back-and-forth movement of personnel between the government and private sector. We trace the historical and economic reasons behind the emergence of this phenomenon and discuss the related perverse consequences, including the perpetuation of the permanent war economy which serves the narrow interests of select elites rather than the broad interests of citizens.

The Political Economy of Foreign Intervention

January 10, 2015

This chapter highlights the insights that the Austrian tradition brings to the analysis of foreign intervention. Foreign intervention is the use of the discretionary power of a government in one society to address the perceived problems in foreign societies. As such, the attempt to exercise top-down government authority, even with the most noble of intentions, will ultimately face problems similar to those faced in all types of central planning. The limits of human reason and the planner’s ability to engage in rational constructivism apply as strongly abroad as they do domestically. This chapter lays out those limitations and encourages a note of caution in attempts to intervene abroad.

A Note on the Market Provision of National Defense

July, 2014

Market-provided national defense famously suffers from a free-rider problem. According to conventional wisdom, markets must therefore underprovide defense. We argue that conventional wisdom is wrong. The free-rider problem that plagues national defense also plagues national offense, leading markets to underprovide the latter as well. Because national offense is the raison d’etre of national defense, whether or not markets provide the efficient level of defense depends on the severity of the free-rider problem in its production, and thus defense’s underprovision, relative to the severity of the free-rider problem in the production of offense, and thus offense’s underprovision. Where the free-rider problem confronted in producing national offense is more severe than that confronted in producing national defense, markets produce the efficient level of national defense.

Find article at The Journal of Private Enterprise.

The Overlooked Costs of the Permanent War Economy

December, 2013

How does the permanent war economy interact, and subsume, the private, non-military economy? Can the two remain at a distance while sharing resource pools? This paper argues that they cannot. Once the U.S. embarked upon the path of permanent war, starting with World War II, the result was a permanent war economy. The permanent war economy continuously draws resources into the military sector at the expense of the private economy, even in times of peace. We explore the overlooked costs of this process. The permanent war economy does not just transfer resources from the private economy, but also distorts and undermines the market process which is ultimately responsible for improvements in standards of living.

The Origins of the Permanent War Economy

September, 2013

Led astray by Marxist and Keynesian dogma, the literature on the origins of the permanent war economy has overlooked a leading cause of the elevated levels of U.S. military spending since the end of World War II: the economic rents created by the federal government’s monopoly on national defense, and the pursuit of those rents by the labor, industry, and military lobbies. Although the permanent war economy benefits powerful special interest groups, it generates a significant negative externality by diverting resources from other, private uses.

Read more about this article at The Independent Institute.