Measuring Defence Output – An Economics Perspective

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Authors
  1. Hartley, K.
  2. Solomon, B.
Corporate Authors
Defence Research and Development Canada, Centre for Operational Research and Analysis, Ottawa ON (CAN)
Abstract
Measuring defense output is a necessary step to successfully apply military cost-benefit analysis (CBA) to evaluate alternative security investments. Other chapters in this book focus on what economists call "intermediate outputs" (e.g. military forces). This chapter offers a higher-level "macro" perspective or overall defense output that encompasses total defense spending. In most countries, the defence sector absorbs substantial scarce resources that have many valuable alternative uses (schools. hospitals, etc.). Whereas defense expenditures are well known within each country, there is no single indicator of value (or benefit) of overall defense output. This contrasts with the valuation of private sector outputs in market economies. In defense, the economist's solution to measuring output assumes output equals inputs (a convention widely used across the public sector), or that the value of defense output is roughly equivalent to expenditures made to produce that output. In sharp contrast, measuring the value of market outputs is not usually regarded as a policy problem. Market economics 'solve' the problem through market prices that reflect choices of large numbers of buyers and sellers. Defense, however, differs in several key ways from private markets, which helps to explain the challenge in measuring and valuing defense output.
Keywords
output;public goods;defence budgets;production functions
Report Number
DRDC-RDDC-2015-P194 — External Literature
Date of publication
08 Apr 2016
Number of Pages
38
DSTKIM No
CA042409
CANDIS No
803532
Format(s):
Electronic Document(PDF)

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