TN LATE AUTUMN 1950, the un■*■ certain character of the international threat presented the possibility of three alternative lines of future development: (1) The international tension might develop into full-scale open war, calling for a maximum military effort accompanied by extremely large Government expenditures. (2) The international tension might subside and a general settlement be achieved permitting major reduction in the level of military spending. (3) The international tension might remain high for a long period of time with no major fighting but with a high level of defense expenditures. Official policy was based on this last assumption. The kind of economy that would be consistent with such a military and expenditure policy may be designated the defense economy. 1 A defense economy is a matter of degree; we have been living in a low-pres-