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Research Paper on Economics

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  Political Economy and State Security
Essay, Custom Research Paper: Political Economy

Classical political economy was forged on the anvil of war. The Seven Years' War had barely ended when Smith published The Wealth of Nations, and the Napoleonic Wars were the backdrop of discussion in Malthus's Essay and Ricardo's Principles, Only John Stuart Mill and the later classicals had the luxury of reflecting on international conflict with the detachment born of the nineteenth-century Pax Britannica.

It might be expected that the classical economists would have eschewed the study of conflict. After all, theirs was a concern with "order" directed by predominantly rational actors toward the satisfaction of human wants. On the surface, at least, war was quintessentially a process of disorder, the destruction of goods and services for no evident want-satisfying purpose, and governed by human "passions" rather than "the interests," to use Albert Hirschman's familiar juxtaposition. To cap it all, war was a process that required public action rather than private market behavior; it involved threats, alarums, stratagems, imposition of costs to achieve an objective, and all the other tactics of an activist state that classical economists sought to avoid -- and that their nemesis, their mercantilist predecessors, had attended to above all. War was a process of disequilibrium, and it was hard to see how equilibrium market analysis could cast much light upon it. Finally, as individuals the classical economists were not warlike types or apt to dwell on the study of conflict. There was among them a colonel of marines (Torrens), but their leading lights were an absentminded professor, a clergyman, a retiring stockbroker, and a polymath raised by his father to read Latin while practically an infant. The classical economists were not exactly a bunch of sissies, but they came close.

So did the classical economists have nothing to say about national security? Was it a subject that they avoided, as we shall see that later economists have tended to do? Not quite! Issues of national security were, in fact, taken up frequently by the classicals, and a number of their observations and speculations stand up well to the test of time. What follows is not a systematic survey of their attention to this subject, but rather some reflections on several security-related topics that interested these economists the most.

Rational behavior would seem to point toward the formation of some sort of global social compact that will conserve productive capacity for the creation of goods and services that respond to human wants. But no such compact exists! Conflict is virtually an unremitting feature of the human condition. Wars and preparations for war, indeed, do exactly the opposite of the economic growth process. They create pain rather than pleasure. Several of the classical economists addressed this question of why men fight and answered it in a fashion that was consistent with their method of inquiry overall.

Adam Smith approached this question both logically and historically (mainly in book 5, chapter 1, "Of the Expences of the Sovereign or Commonwealth"), and he was led to an optimistic conclusion. His thoughts on the subject are contained in widely distributed comments on particular historical examples of conflict. Wars, he believed, arose when nations estimated that the potential returns from conflict exceeded their costs. These calculations changed as economies moved through the familiar development stages, and after a point the likelihood of war having a positive payoff grew less as growth progressed. For a while, however, the situation grew worse rather than better. Shepherds and husbandmen were more effective at warfare than the more primitive hunter-gatherers because they had some working capital with which to pursue conflict. Hunters made major sacrifices when they left their prey to pursue an enemy; herdsmen on the other hand could bring their flocks with them. Settled farmers found the opportunity costs of war reduced to a minimum because up to one-fifth of the agricultural population could be released for warfare during the off season. But with the advent of manufactures the costs of war increased, both because of the complexity of weapons and because as few as one one-hundredth of the manufacturing population could be spared without loss of production.

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