Problems of choice in public investment decisions with particular reference to defence spending

Abstract

The thesis examines the principles that should govern public investment choice, paying particular attention to problems of deciding the appropriate level and pattern of defence spending. Theearly part of the paper is directed towards defining a basis of public choice utilising a concept of welfare interdependence, and a neo-utilitarian approach of maximising the mean welfare of the members of society. It is argued that the members of society are the only appropriate judges of their own welfare, but are only good judges ex post, and must depend therefore on farseeing leaders. It is suggested that individuals are particularly likely to undervalue the future consequences of choice, and that the true social time preference rate is well below the market rate of interest. The need to properly evaluate benefits is stressed, and an outline given of allowances for uncertainty and risk. The general principles of choice established are applied to the problem of deciding how much should be spent on defence . Various factors contributing to the social demand for defence are identified and are discussed with regard to the political processes of democratic and authoritarian governments. The optimum use of defence resources is examined and it is concluded that more attention should be given to the alue of defence capital stock and to the changes in core force elements that should occur with changing imminence of threat . In such analysis the valuation placed upon the e pectations of the future is of particular importance. An idealised procedure for optimising defence capability for given resources is established. There is an extensive bibliography.