The privatisation of military force: Economic virtues, vices and government responsibility

Abstract

The article examines aspects of privatisation in the process of defence production and supply from an economic point of view. It argues that the scope and rationale for the privatisation of military output has expanded with the changes in the mode and style of warfare and the decline of defence budgets evidenced in the post‐Cold War era. The article proposes that limited private production can be both cost‐effective and efficacious, provided that the contracts for that service, and the duties described therein, are sufficiently specific. Privatisation is not, however, a panacea for resource misallocation and not necessarily an organisational structure that provides appropriate incentives to firms, consumers and the state. Viewed from the perspective of economic theory, the article concludes, privatisation of military outputs seems to have some, but quite limited, viability.