Economics of defense

The economics of defense or defense economics is a subfield of economics, an application of the economic theory to the issues of military defense. It is a relatively new field. An early specialized work in the field is the RAND Corporation report The Economics of Defense in the Nuclear Age by Charles J. Hitch and Roland McKean ( 1960, also published as a book ).

Principles
In addition to defense proper, defense economics covers other aspects, such as disarmament and arms conversion.

In terms of economics, a distinctive feature of the defense is that it is public goods, and as such it is both non-excludable and non-rivalrous. As such, it may suffer the so-called "free rider problem".

United States
Typically, the United States uses a combination of hard power (military force), soft power (diplomacy and foreign assistance) and domestic counterterrorism (homeland security). During the early 2000s, the United States' national defense budget rose to about $800 billion per year. In recent years, it has dropped to $600 billion annually, which is still a large figure relative to Cold War averages and other countries' budgets.