Defence and the Free Market

[pErvinalia]

I'm thinking more of military in terms of defence, not invading other countries.

[laklak]

That's your problem, then! You see, the best defense is a good offense, as the coach said. It's hard for an enemy to hurt you if they're already dead.

[pErvinalia]

This is, in economics, the this comes under the theory of "public good." A public good is a category of things that are not amenable to private enterprise or free markets in that they are "non-excludable" and "non-rivalrous." That is, individuals cannot be, as a practical matter, excluded from their use and use by one individual does not reduce availability to others. And, this is an example of where the "free rider problem" comes into play. That is, individuals, who cannot effectively be excluded from receiving the benefit of national defense services, have the incentive not to pay for it. So, it's an illustration, in that sense of "market failure," which is why the government provides the service.

The main reason I started this thread was after thinking about my other military thread. The government decides what technology strategies the military adopts. It picks the winners and losers. When the government picks what areas of education to teach or research, free marketeers say this is a distortion of the market. Or like the government sin taxing things. So why is it different when the government makes such important decisions like whether to support a large slow tank based army vs a faster lighter more mobile strategy? Why can't the market of war decide it?

[Forty Two]

I'm thinking more of military in terms of defence, not invading other countries.

That's not something that can be separated, since defense can be responding to an attack by assaulting the territory of the attacking nation.

And, even if you do make that non-real-world distinction, common defense is a non-excludable resources, such that if a military exists for the common defense of the US, I as an individual have little incentive to pay for it. Surely if someone invades my state, then the military is going to defend the state regardless of whether or not I paid my bill.

[Forty Two]

This is, in economics, the this comes under the theory of "public good." A public good is a category of things that are not amenable to private enterprise or free markets in that they are "non-excludable" and "non-rivalrous." That is, individuals cannot be, as a practical matter, excluded from their use and use by one individual does not reduce availability to others. And, this is an example of where the "free rider problem" comes into play. That is, individuals, who cannot effectively be excluded from receiving the benefit of national defense services, have the incentive not to pay for it. So, it's an illustration, in that sense of "market failure," which is why the government provides the service.

The main reason I started this thread was after thinking about my other military thread. The government decides what technology strategies the military adopts. It picks the winners and losers. When the government picks what areas of education to teach or research, free marketeers say this is a distortion of the market. Or like the government sin taxing things. So why is it different when the government makes such important decisions like whether to support a large slow tank based army vs a faster lighter more mobile strategy? Why can't the market of war decide it?

Your missing the basic, fundamental issue here -- in the case of "common defense" there isn't a market to distort.

Why can't the market decide it? Because there is no private market for national defense.

Try to think of it this way -- who do you sell "national defense" services to, and what, exactly, is sold? When BombThem Corp calls me on the phone and says they want to offer me "national defense" services, what do I get? Do I buy the right to use that service? Or, am I just buying the benefit of being protected by it in situations outside of my control? Since you can't practically have 100,000,000 customers determining when a national defense is called into action, it's really the latter. And, if I don't buy the "national defense" service from BombThem Corp, am I going to be excluded from national defense if someone attacks the nation? How?

[pErvinalia]

This is, in economics, the this comes under the theory of "public good." A public good is a category of things that are not amenable to private enterprise or free markets in that they are "non-excludable" and "non-rivalrous." That is, individuals cannot be, as a practical matter, excluded from their use and use by one individual does not reduce availability to others. And, this is an example of where the "free rider problem" comes into play. That is, individuals, who cannot effectively be excluded from receiving the benefit of national defense services, have the incentive not to pay for it. So, it's an illustration, in that sense of "market failure," which is why the government provides the service.

The main reason I started this thread was after thinking about my other military thread. The government decides what technology strategies the military adopts. It picks the winners and losers. When the government picks what areas of education to teach or research, free marketeers say this is a distortion of the market. Or like the government sin taxing things. So why is it different when the government makes such important decisions like whether to support a large slow tank based army vs a faster lighter more mobile strategy? Why can't the market of war decide it?

Your missing the basic, fundamental issue here -- in the case of "common defense" there isn't a market to distort.

Well in one respect there could be, as I described earlier. That is, multiple companies could competitively tender to run the military for a set period. That would introduce competition and therefore innovation and cost savings.

Try to think of it this way -- who do you sell "national defense" services to, and what, exactly, is sold? When BombThem Corp calls me on the phone and says they want to offer me "national defense" services, what do I get? Do I buy the right to use that service? Or, am I just buying the benefit of being protected by it in situations outside of my control? Since you can't practically have 100,000,000 customers determining when a national defense is called into action, it's really the latter. And, if I don't buy the "national defense" service from BombThem Corp, am I going to be excluded from national defense if someone attacks the nation? How?

They sell them to the government. And the market of experienced warfare punishes those companies that under-perform.

[Forty Two]

This is, in economics, the this comes under the theory of "public good." A public good is a category of things that are not amenable to private enterprise or free markets in that they are "non-excludable" and "non-rivalrous." That is, individuals cannot be, as a practical matter, excluded from their use and use by one individual does not reduce availability to others. And, this is an example of where the "free rider problem" comes into play. That is, individuals, who cannot effectively be excluded from receiving the benefit of national defense services, have the incentive not to pay for it. So, it's an illustration, in that sense of "market failure," which is why the government provides the service.

The main reason I started this thread was after thinking about my other military thread. The government decides what technology strategies the military adopts. It picks the winners and losers. When the government picks what areas of education to teach or research, free marketeers say this is a distortion of the market. Or like the government sin taxing things. So why is it different when the government makes such important decisions like whether to support a large slow tank based army vs a faster lighter more mobile strategy? Why can't the market of war decide it?

Your missing the basic, fundamental issue here -- in the case of "common defense" there isn't a market to distort.

Well in one respect there could be, as I described earlier. That is, multiple companies could competitively tender to run the military for a set period. That would introduce competition and therefore innovation and cost savings.

That's not a free market. That's competitive bidding for a government contract. And, they have that, because private companies build airplanes, tanks, food rations, M-16s, artillery, bombs, and the like. A private company can come up with a new weapon, and present it to the government. So, in that sense, we have a competitive market, but it' s for the sale of certain things, you'll have the F-35 Joint Strike Fighter vs. the F-22 Raptor, for example.

But, you don't have a free market for "national defense" - I.e., the contractor who would be responsible for the overall defense of the country, because that would (a) be a public good for which there is no market (non-exclusive and non-rivalrous), and (b) it would be a delegation of legislative/public policy authority to a private entity.

Try to think of it this way -- who do you sell "national defense" services to, and what, exactly, is sold? When BombThem Corp calls me on the phone and says they want to offer me "national defense" services, what do I get? Do I buy the right to use that service? Or, am I just buying the benefit of being protected by it in situations outside of my control? Since you can't practically have 100,000,000 customers determining when a national defense is called into action, it's really the latter. And, if I don't buy the "national defense" service from BombThem Corp, am I going to be excluded from national defense if someone attacks the nation? How?

They sell them to the government. And the market of experienced warfare punishes those companies that under-perform.

One customer does not a "market" make. You've answered your own question. A market is a medium that allows buyers and sellers of a specific good or service to interact and transact arms length negotiated transactions.

There is health care marketplace because there are goods and services sold by a variety of willing sellers to a variety of willing buyers, such that market forces can actually exist.

[Seth]

Why is the free market not good enough for the defence of the nation. Why is defence socialised? If the free market leads to the best outcomes and the most efficiency of spending, then why are our militaries and their spending under a command economy? If the free market isn't good enough for defence, then why is it allegedly good enough for things like health, education and science?

The primary reason is practical and based on long experience. The free market for military defense is, of course, private mercenary armies. Such private forces can be extremely effective precisely because they operate on a profit motive and therefore the longer they fight the less profit they make, so they tend to be ruthlessly efficient in achieving the objective.

The benefit of a mercenary army is that it's a fixed cost operation and they don't get paid if they lose, so the society doesn't have to pay to support a standing army of its own.

The downside of course is that the very ruthless efficiency that makes mercenary armies cheap almost inevitably leads to abuse of non-combatants and enemy forces both since dealing with prisoners and avoiding civilian casualties and damage to civilian infrastructure cuts into profits and therefore the incentive is to do whatever it takes to win the war.

The upside of this is that wars tend to be nasty and brutish but mercifully short, and when the war is over the mercenaries move on to the next contract.

A standing army on the other hand has less incentive to chase profit and more incentive to prosecute a war to achieve political objectives in ways that may not be the most militarily or economically efficient manner and therefore abusive behavior is less likely.

This can lead to protracted wars due to politicians tying the hands of the military and imposing ROE that prevent the military from operating with maximum efficiency and effectiveness.

The primary risk of a standing army is not in time of war, but when peace breaks out. A standing army is highly likely to champ at the bit and agitate for something to do, much like police SWAT teams, and they often get into mischief because they are bored or dissatisfied with the political constraints put upon them. The larger the standing army, the more dangerous it is to societal liberty and the more likely it is to stage a military coup when it becomes dissatisfied with political control. Of course, the danger of a mercenary army is that without a contract it may do the same thing in order to generate profits.

Historically, large standing armies are much more dangerous to liberty than either small standing armies or mercenaries, which is why the US has a relatively small (less than 2 million) military and a very large citizen-soldier reserve force that is only called to duty when necessary.

[Seth]

Nup, not good enough. Why is defence more important to the nation than health, education and science?

It's not, until it is. Unfortunately when it becomes more important it usually happens very suddenly and it's far too late to build up an army, which takes years and years and huge investments in arms, equipment and infrastructure. Not having a capable army in place when someone invades or invasion of someone is needed means defeat.

[Seth]

Yes (or something equally or more disastrous). Are you not following what this thread is about??

Of course I am but I cant see its purpose. It seems an odd point to try and make. There are certain services that should never be privatised and military forces should not be part of any privatisation although in Britain the urge to privatise everything is great.

The point is to invite free marketeers to explain why the free market allegedly works for things like health, education and science, but not the military. The fact that the free market isn't employed in running the military is an admission that the free market doesn't actually lead to the best social outcome.

...when it comes to the rather unique challenges of military defense of a nation and the maintenance of international peace.

That does not mean that the free market does not lead to the best social outcome in other areas.

You are positing a false dilemma fallacy.

[pErvinalia]

I'm just going to put this thread down to a thought bubble. It's the fault of my other thread and no one commenting on it. It comes out of the question of what is the best approach to future military hardware/tactics. Australia has just spent near enough to $100billion buying F35's and new submarines. Great, we will have kick ass capabilities in conventional warfare (if the F35 actually works). But what if warfare totally changes over the next 20-30 years? It seems logical to me (and others) that warfare will move from large clunky machines to small fast manoeuvrable swarm technologies. It would seem to me that a swarm of tiny independent yet swarming machines could decimate a big submarine (and probably an F35). So this thread came out of the fact that the government is picking winners and losers from such a diverse field, and the consequences of getting it wrong are frightening.

Don't bother responding to this here. I'll edit in a link to my original thread so you can respond there if you want.

Link: http://www.rationalia.com/forum/viewtop ... 38&t=51328

[Svartalf]

What is defence selling btw?

Guns

and free market is a plague because it allows large operators to put the industries of whole countries out of business by undercutting their prices.

a country needs to be reasonably self sustaining in both food and industrial goods, not to mention that this provides jobs

[JimC]

Cold steel!

They don't like it up 'em!

[Forty Two]

Why is the free market not good enough for the defence of the nation. Why is defence socialised? If the free market leads to the best outcomes and the most efficiency of spending, then why are our militaries and their spending under a command economy? If the free market isn't good enough for defence, then why is it allegedly good enough for things like health, education and science?

The primary reason is practical and based on long experience. The free market for military defense is, of course, private mercenary armies. Such private forces can be extremely effective precisely because they operate on a profit motive and therefore the longer they fight the less profit they make, so they tend to be ruthlessly efficient in achieving the objective.

The benefit of a mercenary army is that it's a fixed cost operation and they don't get paid if they lose, so the society doesn't have to pay to support a standing army of its own.

An army is only part of military defense, and only part of national defense. It is not the sum total of "defence of the nation."

[Forty Two]

I'm just going to put this thread down to a thought bubble. It's the fault of my other thread and no one commenting on it. It comes out of the question of what is the best approach to future military hardware/tactics. Australia has just spent near enough to $100billion buying F35's and new submarines. Great, we will have kick ass capabilities in conventional warfare (if the F35 actually works). But what if warfare totally changes over the next 20-30 years? It seems logical to me (and others) that warfare will move from large clunky machines to small fast manoeuvrable swarm technologies. It would seem to me that a swarm of tiny independent yet swarming machines could decimate a big submarine (and probably an F35). So this thread came out of the fact that the government is picking winners and losers from such a diverse field, and the consequences of getting it wrong are frightening.

Don't bother responding to this here. I'll edit in a link to my original thread so you can respond there if you want.

Link: http://www.rationalia.com/forum/viewtop ... 38&t=51328

You're mixing concepts up. The government buys stuff. Is it "picking winners and losers" by buying toilet paper from company X rather than company Y? Not in the sense "picking winners and losers" is used relative to government subsidies. I.e., there is a difference between government as subsidizer and government as "market participant."