State-Provided Defense as Noncomprehensive Planning.

AuthorCoyne, Christopher J.
  1. Introduction

    Even staunch critics of the managerial-administrative state, such as Ludwig von Mises, F. A. Hayek, James Buchanan, and Gordon Tullock, identify a crucial role for government to provide security to citizens. Perhaps the best illustration is Buchanan's notion of the "protective state," which emerges at the constitutional level and is tasked with protecting the core rights of citizens via internal security, contract enforcement, and defense against external threats (1975, pp. 95-97). There is a fundamental tension in the work of these scholars. They identify numerous inherent problems with the operations of the managerial-administrative state. These include the inability to engage in economic calculation, which prevents the efficient allocation of scarce resources, and perverse incentives in political institutions, which result in a variety of undesirable outcomes. At the same time, these authors argue that something akin to the protective state can avoid these problems and successfully provide citizens with protection from threats.

    This paper explores this tension with specific focus on those state activities that fall under the broad, and typically underspecified, category of national defense. Economists commonly characterize national defense as a pure public good that must be provided by the state due to market failure (Coyne and Lucas 2016). This characterization, however, raises a host of issues that most economists ignore. For one, it assumes that the state is capable of providing national defense in the efficient quantities and qualities to overcome these market failures (see Hummel 1990; Hummel and Lavoie 1994; Coyne 2015). Moreover, it assumes that the state's activities are purely liberty enhancing instead of liberty eroding (see Coyne 2015, 2018; Coyne and Hall 2018). In making these assumptions, scholars treat national defense as a "black box" whereby an idealized protective state, imbued with the most awesome of powers, acts in a benevolent and omnipotent manner.

    We open this black box and shed light on some of the issues with state-provided defense. Our core argument is that the state's defense functions require planning, which faces two fundamental issues as discussed by Lavoie (1985). The first is the knowledge problem of how to allocate scarce resources to their highest-valued uses. The second is the power problem that results from the fact that planning requires granting significant discretionary power to the managerial-administrative state.

    Our analysis is best understood in the context of Lavoie's (1985) work on noncomprehensive planning, which refers to state control of parts of the economy with the remainder left to operate freely. Lavoie explores the knowledge and power problems associated with noncomprehensive planning and concludes that "the practice of planning is nothing but the militarization of the economy" because such efforts rely on the military mindset and forms of organization that were employed in the past to organize the war economy. We contribute to this literature and argue that the state provision of defense is the embodiment of Lavoie's noncomprehensive planning. Just like other efforts at noncomprehensive planning, the provision of defense suffers from the aforementioned knowledge and power problems, which we discuss in the following sections. We focus on the provision of defense by the US government, which illustrates the dual problems identified by Lavoie.

  2. The Knowledge Problem

    To carry out its defense activities, the managerial-administrative state requires a dedicated budget. In the United States, the defense budget emerges through a multilayered budgetary process involving the Pentagon, defense committees in Congress, and members of the military industry (see Thorpe 2014). Once finalized, the various government agencies involved spend the budget on securing resources necessary for defense activities. These resources--labor and capital--are transferred from the private sector and enter a military sector with a unique structure compared to most industries in a market economy.

    The national government is the monopoly provider of final military goods and services. In most instances, the production of these goods entails contracting with private firms. In some instances, this process includes the purchase of civilian goods and services that are directed toward military purposes--for example, health care, clothing and uniforms, and vehicles. In other cases, the government purchases defense-specific goods such as weapons and specialized technologies that are not available for public sale to the civilian population.

    The reach of the US military sector into economic life is massive. For example, the US Department of Defense is the nation's largest employer with 1.4 million men and women on active duty and over 850,000 civilian employees. In addition, there are 836,000 members of the Select Reserves and 245,000 members of the Individual Ready Reserve forces (Department of Defense 2015, p. 6). According to one estimate, another 1.6 million Americans work in jobs that supply the military with goods and services (Reich 2010).

    A review of the top 100 defense contractors illustrates the entanglement of the military with a wide variety of private industries, including aerospace (Boeing, General Dynamics, Lockheed Martin), computer and technology (Hewlett-Packard, IBM), accounting and professional services (Deloitte), courier services (FedEx)...

To continue reading

Request your trial