The Unproductive Protective State: The U.S. Defense Sector as a Fiscal Commons

Abstract

Economists model state-provided defense as a value-added, public good. The actual government provision of defense, however, is a “black box” that is rarely analyzed. This chapter contributes to opening this black box by analyzing the U.S. defense budget. We provide an institutional explanation for why scarce public resources are often squandered on defense-related activities. Our framework blends insights from James Buchanan and Elinor Ostrom and models the U.S. defense budget as a “fiscal commons.” We consider the absence of mechanisms to ameliorate overgrazing and, in doing so, emphasize that waste, fraud, and abuse is a system feature of the current system. We also consider the implications for reform.

Keywords: common pool resource, defense, defense budget, defense sector, Elinor Ostrom, fiscal commons, James Buchanan, protective state, productive state, unproductive state

JEL Classification: H56, H60, P16