Video, article references, and books via Robert Wenzel at EconomicPolicyJournal
I found this presentation really interesting. I like to know what things costs and see those costs compared to other costs to get a true assessment on how productive a company or industry is. It is worth your time, and the subject is worthy of study.
What follows are my notes on the presentation.
Productive growth and spending versus parasitic growth. We need to think about parasitic growth when we think of the military production. Military production does not contribute to our welfare in the present or the future. Melman introduces the concept of overkill. He argues that you cannot destroy a city more than once. In the immediate term, once it’s destroyed, it’s destroyed. Bombing a city over and over is excess, and that excess is parasitic.
By the 1960s, the US gov’t, just looking at its strategic air craft and missiles, . . . for every person 6 tons of TNT worth of explosive power. “Am I safer now with 6 tons of TNT or safer with 4 or 1 TNT?” This is clearly wasteful. Parasitic, a very Rothbardian term.
Great point about GDP. GDP doesn’t distinguish between what’s productive and what’s parasitic. Looking at opportunity costs, every tank that is unnecessary comes at the expense of something else. Cost is at the root of Austrian analysis. Costs are really quite stunning. Here’s an example: a single combat pilot costs $5-7 million. The fuel for the jet and his training costs are also astronomical. The fuel that one American driver consumes over a two-year period is equal to the amount of fuel a training jet consumes in under one hour. Mileage cost for an Abrams Tank is not calculated by miles per gallon–but more like gallons to the mile. The tank consumes 3.8 gallons of fuel for every mile.
Between 2% and 11% of the world’s use of 14 important minerals are consumed by the military.
6% of petroleum is consumed by the military. The Pentagon’s energy use in one year could power all US mass transit systems for nearly 14 years.
More outreach to your left wing friends. Building bridges.
Opportunity costs 1947-1987: Department of Defense used $7.62 trillion in capital resources. In 1985 alone, the U.S. Dept. of Commerce, valued the nation’s capital stock at $7.29 trillion. That expenditure of resources you could have either completely replaced the capital stock. Staggering. If anything, that’s an understatement. Any portion to civilian use would have gone to the purcahse of capital goods would have increased the country’s production capacity. These costs are not trivial.
Then there’s the case of technical geniuses.
Finite number of geniuses. Not a case of 10% of the geniuses is a zero sum game.
Geniuses doing project A cannot do Project B. Since WWII, between 33% and 66% of all technical researchers have been working for the military at any given time. Think in terms of the opportunity costs involved there. Civilian research isn’t being done. Researchers have all been sucked into the military industrial complex.
Melman, “When research and development is not properly on behalf of civilian industry results like poor product design or poor production methods can have disastrous effects on the economic position of the industry. When as little as 1.5% of us national product is diverted to military research, it seems little enough but that accounts for more than 50% of the national research and development effort and has left many us civilian product industries at a competitive disadvantage due to faltering product designs and insufficient improvement in industrial production efficiency.
Interesting insight to overlook. Yet another cost that we have to bear.
Government can siphon off brilliant minds and talented people because it offer them tax-funded salaries that private sectors could not keep up with.
WSJ, people in Industry, “Frantic bidding by space and military contractors for scientists and engineers is creating a big shortage for industry. This scarcity along with the skyrocketing salaries it is provoking is bringing almost to a halt the hitherto rapid growth of company supported research. This development hampers efforts to develop new products and processes for the civilian economy.” WSJ.
The American Economic Review does not defend the private sector, “The growth of military and space research and development “has significantly retarded the growth of civilian research and development,” so these are R&D that was never done, and that opportunity is gone forever.
The growth of Defense R&D by bidding up salaries and taking up the cream of new science and engineering graduates has tended to reduce significantly the quantity and quality of R&D undertaken in civilian created laboratory.”
Some argument to the effect that I ought not “You wouldn’t have GPS technology if the gov’t blowing all this money on the military.” It’s called crossover spending. It invents Tang with civilian uses, so it’s not all a waste. A variety of estimates. Pentagon spending over the years has redounded to American society.
Norway has a 70% tax. You would think that the gov’t would deliver on something. Free university education. Okay. Tax rate is 70%. If I were paying 70% in taxes I would expect something, something free. With all the military spending, if a few inventions come out of it, well, that’s the least I would expect.
Melman believe that the lower-end estimate, maybe 5-33%, of these technologies due to defense resear4ch was very low and inefficient were going to be invented anyway. They would have been developed according to society’s timetable.
Easy to dream up all sorts of products, but it’s the development of them that matters. On what timetable do we develop these technologies that benefit society?
To what extent do we deprives ourselves of other goods while we’re siphoning resources into R&D, we ration things. That’s what the market is for. It rations these projects in a way that is consistent with consumer preferences. that’s their desperate attempt that these million dollars haven’t gone to waste.
Another effect of Pentagon dominance over some firms is that and as the Pentagon becomes the chief buyer as a firm gets more involved with the Pentagon, the firm’s business sense begins to dissipate. Pentagon does not make cost consciousness its top priority. Don’t have to worry about controlling costs as with other clients. Pentagon will come up with the money one way or another. Contracting with the Pentagon, all a company has to be concerned with is “Can you deliver on time?” “Can you deal with the deannds and changes of a project?” “Can you pivot, can you roll with the punches, can you speak the language of the military community?” What firms become are not profit-maximizing and cost-minimizing firms, but rather cost-maximizing and subsidy-maximizing firms. One way or another the money will be produced.
Historical costing by Pentagon.
Look at an older war plane to build a new plane. Seems sensible way to estimate costs. It bakes into that particular cake it bakes in a bias to an ever higher baseline. No sucritinizing of the costs.
ARTICLES REFERENCED IN THE PRESENTATION:
1. The Neglected Costs of the Warfare State: An Austrian Tribute to Seymour Melman, Journal of Libertarian Studies, 2010.
2. Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s, Robert Higgs, Independent Institute, 1992.
BOOKS REFERENCED IN THE PRESENTATION
1. Military Spending and Industrial Decline: A Study of the American Machine Tool Industry, Anthony Difilippo, 1986.
2. Pentagon Capitalism: The Political Economy of War, Seymour Melman, 1970.
3. Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, Robert Higgs, 2009.
4. We Who Dared to Say No to War: American Anti-War Writing from 1812 to Now, Murray Polner and Thomas E. Woods, 2008.