Is War Necessary for Economic Growth? Military Procurement and Technology Development

A perennial question in economics is how much U.S. productivity growth, which has been impressive over the past two centuries, has been due to military spending. On the one hand, such spending diverts resources and skilled personnel from commercial activity, especially investment. On the other hand, it speeds up the development of new technologies, especially society-transforming general-purpose technologies, or even brings them into existence. The University of Minnesota economist Ruttan strongly supports the latter influence. He examines six general-purpose technologies: interchangeable parts and mass production, military and commercial aircraft, computers (including software), the Internet, nuclear energy, and space technology (especially satellites). He argues that military procurement -- government demand for the goods or services -- significantly accelerated the commercial introduction of the first four and is probably responsible for the existence of the nuclear power and space satellite industries. The private economy does a fine job of developing and introducing evolutionary technology, but the author is pessimistic about the capacity of the U.S. political system to provide the necessary public support, absent serious war or the threat of war, for revolutionary technologies that have large payoffs only after a decade or two and for which it is difficult for private investors to appropriate many of the gains. Little treatment is given to biotechnology, which does receive significant (nonmilitary) public support, and none to photonics or nanotechnology, which may prove to be the revolutionary technologies of the early twenty-first century.

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