U.S. Military Spending in the Cold War Era: Opportunity Costs, Foreign Crises, and Domestic Constraints

Anyone who has studied elementary economics has encountered the idea that a society's output may be either "guns" or "butter" and that, once all resources are employed, having more of one entails having less of the other. This categorization of output is only a metaphor to make more concrete the concepts of production possibility and opportunity cost. I propose, however, to take the categorization seriously in order to inquire into how the costs of America's cold war military activities have been distributed between the private sector and the governmental nonmilitary sector. Accordingly, I extend the familiar metaphor slightly, dividing the U.S. gross national product (GNP) into three exhaustive classes: government military purchases, denoted by G-M; all government--federal, state, and local--nonmilitary purchases, denoted by G-NM; and all private purchases, whether for consumption or investment (plus net exports), denoted by P. This categorization permits one to view the societal opportunity costs of military purchases as broadly as possible. One is examining not just the division of the federal budget but the division of the entire national flow of production (as conventionally measured).