Although national defense is currently a public good, economists who advocate small government generally agree that the U.S. should privatize national defense to increase the efficiency of the good.
The correct answer and explanation is :
Correct Answer:
False
Explanation:
National defense is considered a public good because it possesses two key characteristics: non-excludability and non-rivalry. This means that once national defense is provided, no individual or group can be excluded from its benefits (non-excludability), and one person’s protection does not reduce the level of protection available to others (non-rivalry).
Economists who advocate for small government often favor privatization to improve efficiency and reduce costs in many sectors, such as healthcare, transportation, and education. However, most economists, even those supporting limited government, do not advocate privatizing national defense. There are several reasons for this:
- Free Rider Problem – If national defense were privatized, individuals or businesses might choose not to pay for it, expecting others to cover the cost. Since they would still benefit from the defense services provided to others, there would be little incentive to contribute, leading to under-provision.
- Market Failure – Private firms operate based on profit motives. A private defense provider may prioritize serving those who can pay rather than ensuring the security of the entire nation, leading to inefficiencies and inequities in protection.
- Coordination and Strategic Planning – National defense requires a centralized authority to make decisions regarding military strategy, international relations, and emergency responses. Privatization would fragment these efforts, reducing the effectiveness of national security.
- Moral and Ethical Considerations – Defense involves life-and-death decisions. Privatizing it could lead to conflicts of interest, where profit-driven motives might take precedence over national security interests.
For these reasons, even small-government economists generally agree that national defense should remain a publicly funded and government-operated service to ensure security, efficiency, and equity.