The opportunity costs of the warfare state

Libertarians rightly criticize the United States as being a vast welfare-warfare state. In fact, the simplest and most direct way of distinguishing leftists, conservatives, and libertarians is to determine what part of the welfare-warfare state they would dismantle. Seymour Melman was a professor of industrial engineering and operations research who wrote many penetrating insights about the many adverse effects of the post World War 2 warfare state. While he was certainly no libertarian and, according to Thomas Woods, never references Bastiat’s famous writings on opportunity costs, his criticisms of the warfare state are based on far ranging and perceptive applications of Bastiat’s conception of opportunity costs (which could be characterized as the logical extension of the broken window fallacy [see previous post]). (As an aside, Bastiat also applied his conception of opportunity costs to the warfare state of mid 19th century France here.)

An obvious libertarian criticism of the warfare state is the vast amount of taxes that are levied on US citizens to pay for it. However, any analysis that stops here is shallow first order thinking, as it only acknowledges “that which is seen”. It is imperative to invoke our inner Bastiat and seek that which is “not seen”. Melman uncovers the “not seen” thus: “Industrial productivity the foundation of every nation’s economic growth, is eroded by
the relentlessly predatory effects of the military economy…. Traditional economic competence of every sort is being eroded by the state capitalist directorate that elevates
inefficiency into a national purpose, that disables the market system, that destroys the
value of the currency, and that diminishes the decision power of all institutions other than
its own.” Also, Tom Woods wrote this about Melman: “Melman conceived of the true cost of the military establishment as including all the consumer goods, services, and technological discoveries that never came into existence because the resources to provide them were diverted into military production.”

Melman’s insights are even more penetrating when he looks at the effects of diverting engineering talent away from the productive economy, the business practices of dealing with the US government as the sole customer and how this impacts the ability of such businesses to compete on the free market, etc.

Tom Woods wrote an excellent essay on Seymour Melman’s work,  The Neglected Costs of the Warfare State: An Austrian Tribute to Seymour Melman. See Wood’s essay and here for Melman’s writings.

Note that all quotes in this post are from Woods’ essay.

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