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Chapter 2
Once public good is provided, others cannot be excluded from its benefits
regardless of whether they paid for it. (Externalities: benefits that become
available to others as a result of the production and provision of a public good.
If prices cannot be charges some other means has to be found to provide the
resources to pay for this good.
Does not require unanimity in the community that a particular public good such
as defence should be provided.
Conclusion:
The economic concept of a pure public good has some utility in understanding
the nature of defence expenditures but the limitations of this must be
recognised.
Deterrence at the national level is a pure public good but this cannot be
extended to defence expenditure when deterrence fails without imposing ethical
values about the survival of the state. The criterion suggested by Adam Smith of
payments according to benefits while analytically sound, falls down when applied
to the real world.
These problems are not avoided when considering a military alliance which has
some characteristics of a public good.
Chapter 3
A ratio such as D/GNP implies that the burden effect of defence is a measure of
the intermediate expenses of producing a national product.
To use factor prices or market prices when measuring GNP and defence burden?
IISS’s annual report The Military Balance uses GNP at market prices.
International comparisons are crude and uncertain measures and because of this
they must be treated sceptically.