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Costs Are Not Benefits

Here’s a letter to the Washington Examiner:

You credulously accept the National Association of Manufacturers’s assumption that defense spending, apart from whatever benefit it might provide on the national-defense front, is a boon to the economy (“Obama, Congress budget rift to cost another 1 million jobs,” June 22).

First, the NAM assumes that resources employed in the defense industry have no alternative uses. This assumption is mistaken: we can produce more guns only by diverting resources away from the production of butter. That the benefit we get from guns might make sacrificing the butter worthwhile does not mean (contrary to the NAM’s implication) that sacrificing the butter is a benefit in and of itself.

Second, the NAM ignores political and bureaucratic realities. As the economic historian Robert Higgs concluded after studying the economics of military spending, “by diverting workers and resources to a bloated, privileged, anticompetitive procurement complex, war buildups have actually reduced the American capacity to invent, innovate, and enhance productivity along nonmilitary lines.”*

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

* Robert Higgs, “How Military Mobilization Hurts the Economy,” in D.N. McCloskey, ed., Second Thoughts: Myths and Morals of U.S. Economic History (New York: Oxford University Press, 1993), p. 34; original emphasis.