Trading Public Goods in the Western Alliance System

Abstract

This article seeks to broaden the scope of analyses of security burden sharing within the Western alliance system beyond the narrow military approach taken by past work in the economic theory of alliances. In contrast to that work, which has shown that the Western allies have been persistently free riding on the military efforts of the United States, an illustrative model is presented that posits the existence of burden sharing across issue areas among the Western allies. The model yields significantly different conclusions regarding (1) the nature of alliance burden sharing, (2) the optimality of alliance security provision, and (3) the future of cooperation in the Western alliance system in the face of declining American hegemony. On a theoretical level, this article begins to formulate a new economic theory of alliances that focuses on “trade” in public goods and adheres closely to the Ricardian theory of comparative advantage. I hypothesize that nations will specialize in the production of those alliance goods (economic, political, and military) for which they possess comparative advantages. This hypothesis is given preliminary support through an examination of allied expenditures on the military and foreign aid.