Governments have at their disposal many fiscal tools to advertise nationwide defense, resembling sanctions, overseas reduction, overseas exchange, overseas finance and legislation blocking off money for foreign terrorism. This ebook examines using theses financial regulations and addresses how most sensible to degree their effectiveness.
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Additional resources for Economic Instruments of Security Policy: Influencing Choices of Leaders
He ruled as an autocrat, but spent a great deal of money on winning the support of the people he ruled. 2. 3. 3 Nothing is free, including the cost for dictators to maintain power. Specifically, dictators must purchase loyalty and repression. The price of more loyalty is the forgone repression and, conversely, the price of more repression is the forgone loyalty, holding all other expenditures constant. Facing conditions of scarcity, a dictator will have to choose expenditures on loyalty and repression.
At the other extreme, if the government spends all of its gross revenues on government services and infrastructure, the net income of the dictator goes to zero. The income-maximizing level of government spending, then, is indicated by G*. Increasing these initial control variables, tax rate (t) and public spending (G), from zero will have a positive effect on income (Y) up to a point and then each will diminish income. By assumption, all investment in this model is either Ig or Id. It may be argued that Id provides greater wealth-creating potential for the economy.
If you are one of the people losing a job, your opinion will surely differ from that of the person gaining the job overseas. The politician or autocrat making the decision, likewise, will have personal passions and interests different from at least some—if not most—of those impacted by the policy. Cost-benefit analysis can inform welfare analysis, but requires attention to the incentives of the decision maker. Consider the standard “guns versus butter” debate. Should a government spend money on defense and weapons or on welfare and food production?