AN ALTERNATIVE MODEL FOR DETERMINING THE RATIONAL AMOUNT OF FUNDS ALLOCATED TO DEFENCE OF THE CR.

Abstract

The present paper presents an alternative approach to determining rational defence spending of the Czech Republic concerning the evolution of a society’s wealth, expressed in terms of the financial valuation of tangible fixed assets. The authors describe the view that the government’s stated commitment to defence spending of 2% is a political decision that does not reflect the impact of the wealth achieved by society, the likelihood of an attack by a foreign power, and the expected level of damage caused by an attack. The authors present a model for determining rational defence spending based on the fair insurance model. The authors conclude that the rational expenditure on the defence of the Czech Republic’s wealth should be between 3.5% and 4.2% of GDP.