On the Economic Theory of Alliances

In: The journal of conflict resolution: journal of the Peace Science Society (International), Band 19, Heft 2, S. 330-348

Abstract

It is the purpose of this article to extend and to clarify the public goods approach to the study of alliances. In particular, the paper examines the nature of defense as a pure public good and draws the conclusion that some defense expenditure may be best classified as an impure public good due to the presence of divisibility and exclusion properties. The traditional pure public good model of alliances is analyzed in a more general framework in order to introduce more fully resource scarcity and to demonstrate the symbiotic properties of the military alliance. Two models of increasing generality recast the analysis so that defense is an impure public good. Both optimal membership size and production efficiency are studied in the impure public good model. The paper concludes with a rationale for world peace organizations based on the economic theory of clubs.