Defence Economics Questions and Answers

Answer: B

The Economics of Defence was written by Gavin Kennedy.

Gavin Kennedy, a British economist, published The Economics of Defence in 1975. It is a standard text in defence economics, covering the burden of defence spending, military manpower, procurement and the economic effects of arms production.

The near-miss is Charles J. Hitch and Roland N. McKean (printed 'Mekan Ronald N.'), whose 1960 book was titled The Economics of Defense in the Nuclear Age, a different title. J. K. Galbraith wrote The Affluent Society and The New Industrial State, not a book of this name.

Answer: D

Ricardo's contribution was on how to raise finance for wars.

David Ricardo, writing after the Napoleonic Wars, examined whether a war should be paid for by taxes or by government borrowing. In his Essay on the Funding System (1820) he argued that the two are in principle equivalent for rational taxpayers, since loans must later be repaid from taxes, and he favoured paying for war out of taxes at the time. This is the origin of the idea now called Ricardian equivalence.

Prohibitive tariffs were the opposite of Ricardo's free-trade views, and 'military taxation' and 'external sources of finance' do not describe his work.

Answer: D

The one that is not a determinant of defence expenditure is public enterprises like post office.

A country's defence spending is shaped by the threats it perceives, its national power and economic capacity, the ideology and strategic goals of its government, and the decisions of its leadership. Leadership, ideology and national power are therefore all standard determinants.

Public enterprises like the post office are civilian services with no bearing on how much a state spends on defence, so they do not belong in the list.

Answer: C

The answer is Adam Smith.

In Book V of The Wealth of Nations (1776), Smith names defence as the first duty of the sovereign: protecting society from the violence of other societies, which only the state can provide for all. Because the benefit of defence goes to the whole society and no one can be excluded from it, defence economists treat Smith's account as the classic statement of defence as a public good.

Adolf Wagner is known for the law of rising public expenditure, K. Subrahmanyam was an Indian strategic analyst, and Maurice Dobb was a Marxist economist; none of them is the source of this view.

Answer: B

Programme budgeting for defence originated in the USA.

The Planning-Programming-Budgeting System (PPBS) was introduced in the US Department of Defense in 1961 by Secretary Robert McNamara, with Charles Hitch as Comptroller. It grouped spending by military missions and programmes, such as strategic forces or airlift, rather than by service or by item, so that costs could be compared with the capabilities they bought.

President Johnson extended the system to other federal departments in 1965, and other countries later borrowed it. Britain, Russia and Australia were adopters or non-users, not the origin.

Answer: D

The answer is Globalisation.

Globalisation integrates production across borders through global supply chains and the spread of technology. In defence it encourages civil-military integration: the armed forces buy from commercial suppliers and use dual-use technologies such as electronics, computing and materials developed for civilian markets, so the cost of developing them is shared and the burden of defence spending falls.

World-systems theory, modernisation theory and Rostow's linear stages of growth are theories of development and underdevelopment; they do not describe this sharing of technology and supply chains between the civil and military sectors.

Answer: C

Both statements are true but unrelated, so the answer is Both (A) and (R) are true and (R) is not the correct explanation of (A).

The Assertion is true: a nation at war depends on its ability to finance the war, through taxation, borrowing and the mobilisation of resources, and without that finance it cannot sustain a war effort.

The Reason is also true: defence economics, which applies economics to defence, disarmament and peace, developed as a distinct academic field only from the 1960s. But the fact that a discipline is new does not explain why war finance matters, so (R) does not explain (A). The options calling either statement false are therefore wrong.

Answer: C

Smith's book appeared in 1776.

An Inquiry into the Nature and Causes of the Wealth of Nations, which the paper calls 'An Enquiry into the Nature and Cause of Wealth of Nation', was published by Adam Smith in London in March 1776, the same year as the American Declaration of Independence. It is the founding work of classical economics, setting out the division of labour, the market's 'invisible hand' and the duties of the state, including defence.

The other years do not fit: 1724 is a year after Smith's birth (1723), 1790 is the year of his death, and 1843 is long after.

Answer: C

The defence budget does not deal with disaster management and mitigation.

India's defence budget pays for the armed forces: salaries and allowances of defence personnel, the maintenance and running of existing equipment, and the capital outlay on procuring new weapons and equipment. Disaster management is funded through the Ministry of Home Affairs and the National and State Disaster Response Funds, with the NDMA and NDRF as the lead agencies.

The armed forces are often called in to help in disasters, but that aid in support of civil authorities is not what the defence budget is drawn up to finance. The other three options are core defence budget heads.

Answer: C

The keyed answer is Planning, Programming and Budgeting of resources for defence requirements.

Defence economics studies how a country allocates scarce resources to defence and how defence spending affects the economy. Its central practical concern is deciding what forces are needed and paying for them efficiently, which in most countries is organised through a Planning, Programming and Budgeting System (PPBS), introduced in the US Defence Department by Robert McNamara in the 1960s.

The pre-war economy and the mobilization of military resources are narrower topics within war economics, and the allocation of natural resources is a general economic question, not the focus of defence economics.