ABSTRACT
There is a long-lasting debate that the government should choose whether to spend its money on ‘butter’ (i.e. food or other services) for its citizens or ‘guns’ which is money spent by the government for military defense. That is, the ‘guns-and-butter’ argument reasons that there is a trade-off between military expenditures and other major government spending. It can be understood that with the limited overall government budget, to increase military expenditures may result in the crowding-out effect on other components of government expenditures such as education and health spending.2 From a speech before the American Society of Newspaper Editors on 16 April 1953, the 34th president of US Dwight D. Eisenhower addressed a typical ‘guns-and-butter’ argument:
Many empirical studies obtain the negative (or trade-off) relationship between defense and welfare using different countries and different types of data (Russett, 1969; Peroff, 1976; Dabelko and McCormick, 1977; Peroff and Podolak-Warren, 1979; Deger, 1985; Apostolakis, 1992). As mentioned in Section 1, Russett (1969) finds a reasonably strong negative relationship between military spending and government spending on health and education for the US, France and UK. Dabelko and McCormick (1977) evaluate the impact of changes in military spending on spending levels for public education and public health in a number of countries in the period of 1950-1972. Their major findings include that: (1) opportunity costs do exist for education and health across all countries and all years, but they are weak in magnitude; (2) levels of economic development have little or no impact upon the opportunity costs for these policy areas; and (3) personalist regimes tend to have higher opportunity costs of defense than do centrist and polyarchic regimes. Further studies by Peroff and Podolak-Warren (1979) examine empirically the potential impact of defense on the private health sector; the results of the analysis give more weight to the hypothesis of a trade-off. Deger (1985) reports a stylized fact that defense has a high physical-resource cost as well as the exceptionally high human-resources costs. Thus, developing nations can and should divert a minute fraction of their massive armament expenditure as a development aid for human capital. Apostolakis (1992), in study of 19 Latin American countries, confirms a trade-off between military and spending on health, education, social security, and welfare in the region.
