LIT6: Poast, P (2019) Beyond the “Sinew of War”:

Question 2

What is the Guns versus Butter trade off?

Answer 2

The trade-off holds that
a national economy has a set endowment of resources
for producing all goods at a given moment in time. The government can draw upon these resources to
produce one of two types of goods: “guns” or “butter.”

“Butter” generally refers to the government’s provision of nonsecurity goods aimed at enhancing societal welfare.

Question 3

What is PPF (Guns n Butter)

Answer 3

The production possibilities frontier (PPF).

The logic of the guns-versus-butter trade-off is captured by a tool common to economic
analysis: the
production possibilities frontier (PPF).

A PPF illustrates
all maximum output possibilities for a given set of inputs, namely labor, land, and capital (with human capital commonly included as a fourth
factor of production).

Question 4

In what ways do state avoid trading off between guns and butter?

Answer 4

For instance, it has long been acknowledged that
alliances might ease the burden
of internal guns production.
But allies are imperfect substitutes for internal arms, because:
1. An ally may not be willing to tolerate the perceived free-riding by the other
state.
2. The ally may not be reliable.
3. Acquiring an ally may also require making a trade-off

Question 5

How does consuming guns influences consumption of butter?

Answer 5

1. A government determines the
   size of a defense budget.
   Because defense expenditures require funds extracted from the populace that
   could have gone toward butter consumption, scholars have explored how defense spending influences the domestic economy.
2. A government identifies methods for
   acquiring funds to fill the budget.
   - The two most widely used means of paying for defense expenditures are:
   A.
   Taxes
   The advantage of taxation is directness: The budgetary costs of current
   defense are not defrayed to a later time period, and hence the state
   avoids the interest payments associated with borrowing.

The disadvantage of taxation is its potential to heighten citizen
discontent with an ongoing war effort.

B. Debt
The advantage is that debt enables a government to delay incurring the
budgetary costs of acquiring military power. A government might be
able to put off the cost indefinitely by issuing new debt to pay maturing debt. This can mitigate the perceived financial burden of defense
spending on a populace, thereby enabling the government to maintain
public support (or even indifference) to an ongoing war effort.

The disadvantage is that borrowing requires a pool of lenders willing to
grant funds and to attract lenders, governments must possess a
sufficient level of economic and financial wherewithal to equip a
capable military.

3. A government chooses weapon systems to be purchased with the budget.

The size of a defense budget cannot be separated from the choice of military
capacity purchased with the budgeted funds. This is because
the choice of weapon can have a profound influence on the amount budgeted toward defense.

Question 6

How does using guns influences consumption of butter

Answer 6

On the one hand, using military power could actually bolster economic activity.
- Military force can be used to acquire and retain valuable territory or natural
resources, which will enable more butter consumption.
- Additionally, military violence (or the threat of military violence) is frequently required to facilitate trade and maintain the global economy

On the other hand, war can wreak havoc on an economy.
-War can reduce the population and destroy physical infrastructure, thereby
shrinking a country’s PPF. War also carries a host of hidden costs, such as future medical care for veterans.
- The macroeconomic disruption associated with war will lead the financial industry to
push leaders to avoid war.