GUNS vs. BUTTER • Guns vs. Butter: A common metaphor for the national production possibility frontier. A trade-off between military spending and spending on civilian welfare; necessarily involves an opportunity cost. • Opportunity Cost: The utility of options foregone as the result of making a decision. • Purchasing Power Parity (PPP): A comparison of the cost of the same bundle of goods in two different currencies. Allows more accurate comparison of human welfare between countries whose costs of living vary widely. • War Economy: Extensive alteration of patterns of production for the purposes of warmaking. • Economic Warfare: Intense coercive disturbance of an adversary’s economy to diminish its power (e.g., naval blockades in Atlantic during WWI and WWII; UN sanctions). • Peace Dividend: The expectation that lower levels of conflict should lower demand for guns and hence generate more ‘butter’. However, there is not strong evidence the economy always does better if we reduce military spending. There may also be significant time lag between the end of conflict and the
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