Some Basic Economics of National Security

Kevin M. Murphy and Robert H. Topel

American Economic Review, 2013, vol. 103, issue 3, 508-11

Abstract: We define national security (NS) as public policies that protect the safety or welfare of a nation's citizens from substantial threats. NS capital provides societal insurance against widespread harm or catastrophe, so optimal NS investments may have very low expected rates of return. Investment targeted at extreme events (war) has spillovers, reducing potential harm in less threatening situations as well. Potential threats are highly uncertain, which raises the value of ex-post scalability of NS technologies. Higher probabilities of extreme events raise the demand for flexibility, so ex-post responses to threats are more elastic, but may reduce current precaution.

JEL-codes: F52 H56 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/aer.103.3.508
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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