I hope my loyal readers will forgive me for going a bit overboard on the fact that I think cuts in US defense spending will do the US economy well, but you have to read Thomas K. Duncan and Christopher J. Coyne’s new paper on “The Overlooked Costs of the Permanent War Economy”. Here is the abstract:
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.
Just have a look at this excellent paper and then I will shut up about this issue – for now at least.