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Some Basic Economics of National Security

Author

Listed:
  • Kevin M. Murphy
  • Robert H. Topel

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.

Suggested Citation

  • Kevin M. Murphy & Robert H. Topel, 2013. "Some Basic Economics of National Security," American Economic Review, American Economic Association, vol. 103(3), pages 508-511, May.
    • Handle: RePEc:aea:aecrev:v:103:y:2013:i:3:p:508-11
    Note: DOI: 10.1257/aer.103.3.508
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.3.508
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    Cited by:

    1. Karouzakis, Nikolaos & Tzioumis, Konstantinos, 2021. "Spillover costs of national security policies," Annals of Tourism Research, Elsevier, vol. 88(C).

    More about this item

    JEL classification:

    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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