An Alternative Answer to: Who Pays for Defense?

Abstract

In a recent article (this Review, 63 [June, 1969]), Bruce Russett attempts to answer the title question by using two-variable regression analysis to estimate the “trade-off” relationships between the defense spending proportion of Gross National Product (GNP) and the other nondefense expenditure proportions of GNP for the 1939–68 period. This paper contends that Russett's method of analysis is misleading because it does not permit the detection of possible subperiod shifts in the trade-off relationships. The results of a multiple regression, dummy variable analysis indicate that significant shifts in both the sign and the numerical values of the trade-off relationships occurred between the three war periods and the peacetime period. Two attempts to identify the reasons for the shifts produced mixed results, but our tentative conclusion is that the shifts are related to subperiod differences in the unemployment rate and the methods of financing defense expenditures.