Lee Hansen
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Economics of the Military DraftAuthor(s): W. Lee Hansen and Burton A. WeisbrodSource: The Quarterly Journal of Economics, Vol. 81, No. 3 (Aug., 1967), pp. 395-421Published by: Oxford University PressStable URL: http://www.jstor.org/stable/1884808.
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ECONOMICS
OF
THE
MILITARY
DRAFT
*
W.
LEE HANSEN
AND
BURTON
A.
WEISBROD
I.
The
conceptual
framework,
396.-II.
The
model,
402.--III.
Empiri-
cal
application,
406.--IV. Some
extensions
of
the
analysis,
411.-V.
Conclusion,
421.
This
paper
investigates
two
important
consequences
of
the
present military
draft
system.
They
are distributive
effects-the
impact
on
the
distribution of
real
output,
and allocative
costs
-
the
impact
on the
size
of
that
output.
The
distributive
effects
result
from the
relatively
low
rate of
pay
to draft-affected men -what
we refer to as the
implicit
income
tax.
The
allocative
costs result
from
the
effects of
the
military
personnel
system
on the
efficiency
with which
a
given
level
of resources
is allocated
among
alternative
uses.
In
analyzing
the
consequences
of the
draft
system,
a standard
for
comparison
is
necessary.
For this
standard
we have
selected
a
free-market, voluntary system,
but
in
so
doing
we
do
not
intend to
suggest
either
that
this
is the
only
alternative
worthy
of considera-
tion,
or
that,
all
things
considered,
it
is
preferable
to
the
existing
draft
system.
Whether
a
voluntary
system
is
preferable
under
present
or
any
other
conditions
is not the
issue;
rather,
we
wish to
point
out certain
consequences
of
existing
arrangements.'
These
consequences
of
the
draft
system
stem
directly
from
several
key
features of that
system,
including:
(1) The compulsion to serve; the individual,
if
called,
has
no
choice
as to
whether
or
not
he
serves.
(2)
The
nature
of
the
selection
procedure;
as
long
as the size
of the
draft-age
pool
substantially
exceeds
military
requirements,
rather
arbitrary
decisions
must
be
made
concerning
draft
eligibility,
i.e.,
which
segments
of
the
population
will
be
exempted
or
rejected,
and
which selected.
*
We wish
to
acknowledge
the
comments
of A.
Holtmann,
S.
Altman,
and
others,
the
research assistance
of
E.
Fenlon,
and
the financial
assistance
pro-
vided
by
the Graduate School of The
University
of Wisconsin. Much of the
work
on this
paper
was done
in
1965
in
connection
with then-current
in-
vestigations
of the
draft.
Subsequent
to
the
writing
of
this
paper,
several other
papers
on this
subject
have
been
circulated.
See
for
example,
Walter
Y.
Oi,
The Economic
Cost of
the
Draft,
and
Stuart
H. Altman
and
Alan
E.
Fechter,
The
Supply
of
Military
Personnel
in
the
Absence
of a
Draft,
papers pre-
sented at
the
American
Economic
Association
meetings,
December
1966.
1. In
considering
these
alternatives
in a
comparative-statics
framework
we
ignore
any
and all
transition
costs
involved
in
shifting
from one
system
to
another.
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QUARTERLY
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(3) Following
from
(2),
the
uncertainty
for
men
of
draftable
age
as
to
whether,
when,
and
for
how
long
they
might
be
required
to
serve.
(4)
The
generally
below-market
wage
paid;
draft
systems
are
customarily
(though
not
necessarily)
characterized
by
rates
of
pay
that
are below
those
available
to
comparable
men in
the civilian
sector.
This
study
has
limited
scope.
It is limited
to
the
analysis and,
where
feasible,
the
estimation of
the
effects of
the
military
draft
system
on the
size
and distribution of
real
output,
holding
constant
the level of aggregate resource use. It does not consider the effects
of
the draft
system
on
such extra-economic variables
as
the
quality
of
good
citizenship,
or the
bringing
together
of men from
diverse
regions
and
backgrounds,
or the ethical
issues
relevant
to
how the
risk
of
death in
combat
-which
has
increased
with the
expansion
of
the
Vietnam
war
-should be
shared.
Neither
does
it
consider
the
desirability
of
altering
the size
of
the
armed
forces;
that
is
taken
as
given.
Rather,
we
concentrate
on
the
economic
effects
of the
system by which a given level and quality of military manpower is
secured.2
However,
toward the close of
the
paper
we do
show
how
the
draft
system
tends to
increase the
number of
men
in
uniform
(at
any point
in
time)
above that
necessary
to
provide
a
given
military
capability.
The
plan
of
the
paper
is as
follows:
in
Section
I
the
income-
distributive effects
and
the
allocative-efficiency
costs
of
the
present
draft
system
are examined
at
the
conceptual
level.
In
Section
II
the model underlying the empirical analysis is presented, and in
Section
III an
empirical
version
of
the
model
is
developed
and
some
quantitative
estimates
are
derived.
Finally,
Section
IV
explores
some
ramifications
of the
analysis.
I. THE CONCEPTUAL
RAMEWORK
A.
Distributive
Effects
The current draft system imposes an implicit income tax on
draftees,
collected in
the
form
of
reduced
rates
of
pay,
i.e.,
the
difference
between their
civilian
opportunity
cost and their
military
remuneration--in
cash and
in
kind.
This
implicit
tax
currently
redounds
to
the
advantage
of
taxpayers
in
general, who,
as
a
con-
2.
For
an
extensive
bibliographic
urvey
of
the literatureon
military
manpower
policy,
see
Military Manpower
Policy:
A
Bibliographic
Survey,
Adjutant
General
Department
f the
Army,Department
of
Defense,
June
1,
1965.
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ECONOMICS
OF THE MILITARY DRAFT
sequence,
pay
smaller
explicit
taxes
than
they
would
if
draftees
were
not
thus
taxed.
This
implicit
tax
on
servicemen-which
involves
a
redistribution
of
income
between servicemen
and civilians
-
is
what we
mean
by
distributive effects.
To observe
that the choice
between
a draft
and
a
voluntary
system
involves
a
different
distribution
of income
and
output
in
the
economy
does not
imply
the
superiority
of
either
system.
For
taxpayers
in
general,
the draft
provides
an
inexpensive
method
of
maintaining
a
desired
level of
defense
capability.
However, during
the
early
1960's
society
became
increasingly
concerned
with
the
growing inequity
of the
implicit
tax on
draftees,
as an ever-smaller
fraction
of
the
potential
manpower pool
became
subject
to
the
tax.
This
occurred as
the number of
men of
draftable
age
grew,
while
concurrently
military
manpower
requirements
were
declin-
ing.
Even with the
heightened
military
manpower
requirements
produced
by
the Vietnam
war,
it
remains true
that a substantial
fraction of
young
men
are
not
serving
and will
not serve because
they
are
rejected
or
exempted,
or
because
deferments
carry
them
beyond the established upper age limit. Thus, the Universal Military
Training
Act is even now not
universal,
and the
tax
which
it
imposes
remains selective
and
discriminatory.3
This
brief
discussion
has
recognized
the effects
of
the
draft
system
on
the
distribution
of
a
given
level of
real
income.
But,
the
draft
system, by
constraining
the allocation
of
resources,
also
effects
-
and
adversely
-
the size of
real income.
The next
section
considers
these allocative costs.
B.
Allocative-Efficiency
Costs
A
draft
system replaces
the
price
mechanism
of the
market
place
with a direct-control
mechanism
for
allocating
labor
resources
between the
military
and civilian
sectors
of
the
economy.
In the
3. There are a number of
dimensions to
the
redistributional
effects
of the
draft.
To the
extent that
military personnel,
who
are
presently
arrayed
toward
the lower end of the income
distribution,
would
receive
income
increases
under
a
voluntary
system,
there would
tend
to
be
greater equality
in
the
overall
income-size distribution if a voluntary system were introduced. Distribu-
tional
changes
would occur
not
only by
income
size,
but
also
by age,
geo-
graphic area,
and
industry
or
occupational
affiliation.
For
example,
since the
military
offers
a
uniform
wage throughout
the
country,
the
existence
of
in-
terregional wage
difference in the
nonmilitary
sector tends
to
make
military
service
relatively
more attractive
in
some
regions
than
in others.
Similarily,
the
drawing
power
of
the
military
for men
in
some
occupations
or
industry
groups
is
stronger
than
in
others.
In
addition,
the
attractiveness of the
military
services
varies
with
respect
to one's
age.
The net
impact
of these
illustrative distributional effects
of
a
voluntary
system
would
be
to
accentuate
labor
market and
related
pressures
in
some areas or sectors
of
the
economy
and to relieve them
in
others.
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process,
the
draft
system
tends to
produce
a
variety
of
economic
costs
by:
(1) Restricting
labor
mobility through its compulsory aspects,
thereby
leading
to
substitution effects within
the
military.
These
latter tend
to favor
production
techniques using
relatively
large
amounts
of
labor
in
general
and skilled labor
in
particular,
given
the
cheapness
of
manpower
to
the
services and the
absence
of
price
differentials
between
manpower
at various
skill
levels.
(2)
Creating
incentive
effects
and increased
uncertainty
for
employers
and
employees,
through
its
eligibility
criteria and its
induction scheduling arrangements.
(3)
Increasing
turnover
rates,
thereby
adding
to the
organiza-
tional,
training,
and
administrative costs
of
meeting
military
man-
power
needs.
These three
types
of
costs
are
not
independent
of each
other,
and
the
distinction
among
them
is not
always clear,
but this
division
provides
a useful
basis
for
analyzing
the
principal
allocative
costs
of a
draft
system.
While
the
impact
of each
type
of cost
appears
in
both the civilian and military sectors of the economy, the first of
these
costs--labor
mobility
costs -has its
major
effect on the
allocation
of
resources between the
civilian
and
military
sectors,
while
costs of the
second and
third
types
are
confined
largely
to
resource
allocations within
the
civilian
and the
military
sectors,
respectively.
1.
Constraints
on labor
mobility.
The existence of
a
draft
system together
with
its
corollary
-
a
wage
level
inadequate
to
attract the number and quality of military personnel required
-
inevitably
determines
which
people
are
in
the
military
service at
any
point
in
time
and which are
not.
If
manpower
requirements
are
met
through
a
voluntary
enlistment
system,
with
wage
and other
incentives
adequate
to
generate
the
required
number of
enlistments,
the
specific
individuals
volunteering
for
military
service
would
not
be the
same
as those called into
the armed forces under
a
draft
system.
The
draft
system,
through
its
coercive
power,
restricts
opportunities for labor resources to move into uses where their net
productivity
is
greatest, given
individual
utility
functions,4
and
thereby
reduces
real national
product
below
the
level
which
could
be
attained with
any
given
level
of
aggregate
resource
use.
This
reallocation occurs
in
the
following
way.
Under a
draft
system
of
the
present
type,
a considerable
degree
of
randomness
4.
Utility
functions
will,
of
course,
reflect
any preferences
for
or
aversion
to
military
service,
with
all that these
entail.
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ECONOMICS OF
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MILITARY
DRAFT
exists
with
respect
to
the
civilian
productivity
of
men
drafted for
service.
Optimally,
from
the
standpoint
of
efficiency
in the
use of
manpower
resources,
the
services
should be staffed
by
those
men
who,
for the
given
level
and
quality
of
manpower required,
have
the
lowest civilian
opportunity
cost
(productivity.)
5
The
draft
system
does
this
very
imperfectly,
at
best,
since
among
eligible
men,
the
great
variations
in
their
civilian
productivity
are
given
scant
consideration in
making
selections
for
the
draft.6
The
opportunity
costs
imposed
on
the
civilian
economy by
this
largely
random
process
of selection
tend to be
greater
than
the
costs
necessary
to
secure
the needed
quantity
and
quality
of men.
To
the
extent that men who are
drafted
have
greater
civilian
produc-
tivity
than some
who
are
not drafted
but
who would be
equally
acceptable
to the
military
services,
the
draft
system
unnecessarily
depresses
real
output
in
the civilian sector
of
the
economy.
By
contrast,
under a
voluntary
system
in which
military
wage
rates
were
sufficiently
high
to
attract
the
personnel required,
men
would
offer
their
labor
services
to
the armed forces
only
to
the extent
that
their value to the armed forces exceeded their value (productivity)
outside,
as
conditioned
by
individual
preferences.
Thus,
the
composition
of
military
personnel
with
respect
to
their
civilian
productivity
would differ
from that
produced by
a
draft;
the con-
sequence
would
be
an increase in
aggregate
real
output
in the
rest
of
the
economy,
with no
decrease
in
the
capability
of
the
military
sector.7
2.
Incentive
and
uncertainty effects.
The draft
system
pro-
duces a variety of incentive and uncertainty effects for both private
5.
Other
goals
than economic
efficiency
should
influence
military
man-
power
policy,
of
course,
but
noneconomic considerations
are
beyond
the
scope
of this
analysis.
6. One
exception,
of
course,
is
the deferment of men
in
occupations
deem-
ed
essential
for
national
defense.
Another
involves
deferments of
graduate
and
professional
school
students-deferments
which
may
in
effect become
exemptions
as
students
pass
the
draftable
age.
7.
Foregone
productivity
in
the
civilian
sector, occurring
because of the
draft
system, may
also take the
form of
foregone
future
output.
The latter
involves
foregone,
or
at least
postponed,
training
and
educational
services,
insofar as the availability of such services to members of the armed forces
falls short of
their
availability
in
the
civilian
economy.
(Training
and
educational activities are
less
likely
to
be
foregone
if similar
post-service
op-
portunities
are
available
through,
for
example,
a
GI
Bill. Of
course,
the
pro-
vision
of
such
opportunities
amounts to a
constrained
increase
in
compen-
sation.)
If
education
and
training
of the
types
having
nonmilitary
value
are
less
readily
available
in
the
military sector,
the draft
system
involves
fore-
gone
current
capital
formation via education
and
training
and
hence fore-
gone
future
productivity.
The
extent of
such loss is
mitigated
insofar as the
education
and
training programs provided
by
the
military
services
produce
skills
having
transferable value to the rest
of the
economy.
However,
this
aspect
is
not
dealt with
here.
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employers
and
potential
draftees.
Incentive effects
are
necessary
consequences
of the existence of the
draft.
Uncertainty
effects are
results
of
the
particular eligibility
and selection
procedures
cur-
rently
employed.
The
very
existence of a draft
gives
rise
to
incentive
effects
regardless
of the
degree
of
uncertainty
that it
may
or
may
not
produce.
If,
for
example,
all men
were to be
drafted
for, say,
two
years
at
age
eighteen,
both
employers
and
potential
draftees
might
be
expected
to
behave
differently
than
they
would
otherwise.
Employers might
not
contemplate hiring young
people
until
after
their
military service,
and
young people
would
have
to
defer
their
post-high
school education and
training.
Or
if
some
men
were
to
be
automatically exempted
from
the
draft,
their
hiring
and
educa-
tional
possibilities
would
be
enhanced
relative
to
draft-eligible
men.
The draft
also
gives
rise to increased
uncertainty
so
long
as
the
draft-eligible
population
exceeds
military
personnel
require-
ments.
This
uncertainty
operates
at both the
group
and
individual
levels.
Uncertainty
exists at
the
group
level insofar
as
the
total
number of persons who will be drafted is not known, or as the future
dimensions of the
draft-eligible
pool
are
not
specified
(i.e.,
draft
exemption categories
may
be
changed).
But
even
if
it
were
known
with
certainty
what the total number of
draftees will be
and
what
the
duration of
military
service
for
each
draftee will
be,
there
may
remain
considerable
uncertainty
with
respect
to
precisely
which in-
dividuals
will
be
selected for
the
draft.8
Thus,
for
the
individual
worker,
there is
uncertainty
regarding
whether
and when he
might
be drafted, and for the individual employer, there is uncertainty
regarding
the wisdom of
hiring
any
draft-eligible
man.
Even
if
no
men
are to be drafted
during
some
period,
the
very
existence
of
a
draft law
automatically
gives
rise to
these
economic
costs.
Even
if,
ex
post,
the
number
of
draftees
during
some
period
were
actually zero,
it
may
not have been at
all
clear
in
advance that
this
would
be the
case.
And
since
employers
as well
as
employees
must
plan
for the
future,
their
decisions will be
affected
by
anticipa-
tions about the workings of the draft system, quite apart from what
does,
in
fact,
happen.
As
pointed
out
earlier,
not
only
are
employers'
decisions
likely
to
be
affected
by
the
draft,
but the same
is true of
decisions
by
draft-eligible
young
men.
In
general,
the draft
system
establishes
incentives
for
avoiding
draft
eligibility,
and
this
alters
individual
8.
For
some
categories
of
people exempted
from
the draft
there
will
be
no
uncertainty
regarding
their
draft status so
long
as
the rules are not
changed.
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decisions
regarding employment,
occupational
choice,
and invest-
ment
in
training.
For
example, young
people,
recognizing
their
eligibility,
might
be
encouraged
to avoid
the
draft
by
placing
them-
selves in a deferred or excluded
group,
either
by
enrolling
in
college
9
or
by
marrying
and
having
children,
which
they
might
not other-
wise have
done
at
the
time.1
Or,
recognizing
that
induction is
imminent,
they
might
be
disposed
to take
temporary
jobs
that
have
no
real
career future.
Or,
they
might
not bother to seek
any
em-
ployment
at
all.
The
draft-created cost
of increased
uncertainty
in
the
civilian
sector of the
economy
is the
inverse
of
the
benefits,
in
terms
of
both
flexibility
and
certainty,
which
a
draft
system
provides
for the
military
sector.
With
a draft the
military
is
readily
able
to
secure
whatever
men are
needed,
whenever
they
are needed. But
under
a
voluntary
system
the
military
services
would
need
to
possess
considerable
flexibility
in
establishing
pay
schedules
in
order to
adjust
to
changing
supply
and
demand
conditions
in
the
interrelated
military
and civilian
segments
of
the
economy.
In
the
absence
of
such flexibility a voluntary system might well impose intolerable
burdens
on
the
national defense
effort,
particularly
in times
of
crisis,
when
sharp
increases
in
the
number
of
personnel
are
required.
Thus,
whereas a
voluntary
system
would
reduce
uncertainty
in
the
civilian
sector,
this
might
well come
at the
expense
of
greater
un-
certainty
and
diminished
flexibility
in
the
military
sector.
It could
be
argued,
of
course,
that
in
periods
of crisis
a
draft
system
could
be
reinstituted.
However,
to the extent
that
the
draft
were to be reinstituted frequently, uncertainty in the nonmilitary
sector
would
be increased.
Consequently,
standby
authority
to
reinstitute
the
draft would
have
to
be used
judiciously-and
only
in
clear
emergency
cases
-
lest the civilian sector
of
the
economy
be
adversely
effected.
Vacillation
between a
voluntary
and a draft
system
might
well
have more
serious economic effects than
the
con-
sistent
use
of
a draft
system.
3.
Organizational
and administrative
costs.
The draft
produces
several types of resource-allocative changes within the military sec-
tor.
First,
as
noted
above,
one
potentially
important
allocative
effect
of a
draft
system
results
from the
availability
of
military
man-
power
at
wage
rates that
fail
to reflect
opportunity
costs.
Among
the
9. Such
incentives
to
increase
purchases
of
education tend
to
offset
forces such
as
capital-market
mperfections
and the lack of income-tax
depreciability
f educational
expenditures
f
a human-investment
ype.
1.
Of
course,
n
designating
ertain
groups
as eitherdeferred
r
exempted,
the Selective Service
System
presumably
does
not intend to stimulate the
marriage
ate
or
encourage
poor
students o
pursue
higher
education.
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decisions which the
military
services must
make are
choices
between
the
degree
of
manpower
utilization
and the
degree
of
hardware
(capital)
utilization.
Since
the latter is
generally
bought
in
private,
uncontrolled
markets,
while the former is obtained at below market
prices
through
the
draft,
an
incentive exists
for the
services to sub-
stitute labor
for
capital equipment
to
a
superoptimal extent,2
or
at
least
to
substitute
highly
skilled,
highly
trained
labor--having
large
amounts
of
human
capital
-
for less skilled labor.
Second,
and
again
in
large
part
as
a
result
of the low
wage
level
existing
under the familiar
type
of
draft
arrangement,
the
system
tends
to
cause an
excessive
rate
of
manpower
turnover.
This
re-
sults in an
unnecessarily
large
quantity
of resources
devoted to
training
new
inductees.
That
is,
an
unnecessarily
large
fraction
of
servicemen are not
combat-ready, being
involved
in
training
ac-
tivities
either
as
trainees
or
as instructors or administrators.
As a
consequence,
to have a
given
number
of
ready
men
at
any
point
in
time,
the total
number
of
men
in
uniform must
be
larger
than
if
turnover rates
were
not
pushed up
by
the
submarket
wage
level
associated with the draft.3
At the same
time,
even
under a
voluntary system
some
ad-
ministrative
costs
associated
with
the Selective
Service
System
would
continue,
since the draft
machinery
would
probably
have to
be
retained
for
possible
emergency
use.
Moreover,
a
voluntary
sys-
tem
would entail certain
additional
costs
not
incurred
with the
draft. There
might
be need
for intensified
study
of the
price-
elasticity
of the
military
labor
supply
function,
and
recruiting
(ad-
vertising) efforts might have to be stepped up, depending upon the
attractiveness
of
the
financial
inducements.
In
summary,
any
ad-
ministrative-cost
savings
that resulted from the
inactivation
of the
Selective
Service
System
might
be
more than offset
by
the
costs of
more intensive
recruiting
and of additional
labor
market
analyses.
II.
THE MODEL
Our model for estimating the magnitude of the distributive
effects and allocative costs
(except
for
the incentive and
uncertainty
2.
As a
result,
the civilian
economy
tends to have too low a
labor/
capital
ratio,
for
a
given
level of
aggregate employment
in
the total
economy
(including
the
military).
Offsetting
this
tendency
perhaps,
is the
desire
of
military
officials to court
public
favor
by
holding
down
the
size of the draft
call.
3.
A
relatively high
rate of
turnover
is
not inherent
in
the
draft
system,
since,
obviously,
men could be
drafted
for
any
desired
period. However,
our
society
has
chosen
to make
the
period
of
compulsory
duty
rather
brief,
in
part,
no
doubt,
to offset
the
loss of
job
freedom and income
imposed
on draftees.
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costs with
which
we are unable
to
deal)
is
most
easily
understood
by
reference
to
Figure
I.
At
this
point
the
model is
set forth
at
the
conceptual level,
while
in Part
III
its
empirical counterparts
are
presented.
We
turn
first to
the use
of the
model
for
estimating
the
draft
system's
labor
mobility
costs
which
are a
major
portion
of
total
allocative
costs.
As
noted
in
Section
I,
the
efficient
allocation
of
labor
between
the
military
services
and
the
civilian
sector
requires
that civilian
opportunity
costs
be
minimized, given
the number
and
quality
of
men taken
into
the
services.
The cumulative
distribution
of values of such civilian opportunities (marginal productivities)
for
men
of the
specified
quality,
y,
is
given
by S,
in
Figure
I. The
number
of
draft-affected
men
required
by
the
military
services is
N
4.
In
Figure
I
the
marginal
opportunity
cost
of ON
men
is
NB
;$/Yr
iSy
W
E
v
,oD
A
O
N T
Number
of
Men
FIGURE
A
Model
of Allocative
Costs
and Distributive
Effects
of
the
Draft
and
the
total
opportunity
cost
is
OABN
or
fSydN.
OABN
is
the
minimum
total
foregone
civilian
output
consistent
with
acquisition
by
the
military
services
of N
men of
quality
y,
given
the stock
of
4. We
retain
the
assumption,
from
Section
I,
that
manpower
needs
are
a
given
-
that
is,
they
are
determined
exogenously.
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resources,
the
state
of
technology,
and
individual
preferences
-
in-
cluding preferences
between civilian
and
military
service
employ-
ment.
OV
(=
OABN
-
ON)
is
the
corresponding
minimum
average
foregone
civilian
output.
The distance OV
may
also be viewed as
an
estimate
of the
average
civilian
output
that
would
be
foregone
if
there were a
voluntary
system
of
military
manpower
procurement.
Thus,
if this
minimum
foregone
civilian
output
is
compared
with
actual
foregone
civilian
output
under
the
draft
system,
the
differ-
ence
represents
an
estimate
of the cost
of labor
misallocation
between
the
military
and civilian
sectors
of
the
economy--what
we have
termed the labor-mobility
allocative
cost
of
the draft.5
Actual
foregone
civilian
output may
be
derived
from
Figure
I
with
the
aid
of an
additional
assumption,
namely,
that the
existing
draft
system
makes selections
among
eligible
men without
reference,
in
general,
to
their
civilian
productivity
-
at
least with
respect
to
men within
each
quality
class.6
That
is,
the
selection
may
be
thought
of
as
essentially
a
random
drawing
from
the distribution
of
civilian
labor
productivities.7
If the N men selected are assumed to constitute a random selec-
tion
from
the
group
of
T men
(T
>
V)
of
quality
y
in the
popula-
tion,
their
average
foregone
civilian
productivity,
OM,
will exceed
OV
per
man,
as
long
as
Ty
>
Ny
and
Sy
is
not
infinitely
elastic
throughout
its
range.
The difference
between
the actual
and
mini-
mum
foregone
productivity
per
man,
OM
-
OV,
is
the
average,
the
per
man
labor-mobility
cost
which
results
from
the draft
system's
compulsory
selection
process,
combined
with
its
lack
of
regard
for
opportunity costs. The corresponding total labor mobility cost is
OMCN-OVDN.
At
this
stage
we
turn
to
the
model's
use
in
estimating
the
in-
come-distributive
effect
of the
draft
system,
in the form
of
the
implicit
income
tax
on
draftees.
We
have
already
derived
OMCN
as
the
total
foregone
civilian
productivity
of
draft-affected
men.
If
we assume
that
wages
in
the
civilian
economy
are
equated
with
the value
of
marginal productivity,8
then
OMCN
also
represents
gross
foregone
earnings
of draftees. The difference between these
gross
foregone
earnings
and
real
earnings
in service
is
the
net
fore-
5.
This assumes
implicitly
that
the value
of
on-the-job
training provided
to
servicemen
is
approximately
the
same
as that
which
they
would
have
re-
ceived
in
the
civilian
economy.
6.
Operational
measures
of
quality
are
discussed
in
Part III.
7.
This is
not
to
argue
that
the
selection
process
is
actually
random,
even within
education
classes,
but
only
that
such
an
assumption
seems
to
be
a useful and
reasonable
approximation.
8.
Because
of market
imperfections,
the
assumption
is not
entirely
valid.
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gone
earnings
of
draftees--their
implicit
income tax.
In
Figure
I
the
value
of
draftee's
earnings
in
service-including
income
in
kind (not only food, shelter, etc., but also the civilian value of
military
training
programs),
as well
as
in
cash-is
denoted
by
W;
W
is
assumed
to
be
the same
for
all
draftees,
regardless
of
their
civilian
earnings
opportunities.
The
difference,
OM
-
OW,
is
the
implicit
annual income
tax
per
draftee,
and,
of
course,
OMCN
-
OWEN
is the
total
implicit
tax
on
all
draftees.9
Thus far we
have
shown
how,
in
principle,
the
labor-mobility
costs and certain
income-redistributive
effects
of
the
draft can
be
estimated, taking military manpower needs as given. Now let us
modify
somewhat our
assumption
that
military
manpower
needs
are determined
exogenously.
Presumably,
military
manpower
requirements
relate to
the number
of
ready
men
(hereinafter
denoted
as
R),
not
merely
the number
in
uniform
(N).
That
is,
men
involved
in
training
-
either as
new recruits
or as
instructors
or administrators
of
these
new
recruits
-
are not
ready,
although
the
instructor-administrator
cadre
could
be
withdrawn
from
those
activities.
The
importance
of
the
distinction
between
ready
and
nonready
men
is that
the
higher
the
rate
of
manpower
turnover
in
the
services,
the smaller
will
be
the
fraction
of
men
in
uniform
(N)
who
are
ready,
and,
hence,
the
greater
N will have
to
be
to
provide
a
given
R.
The
presence
of
an
implicit
tax on draftees
causes
a
higher
turn-
over
rate
than
would
result
from
a
voluntary
system
with
competi-
tive wage rates, and thus the current type of draft system causes
N to
be
greater
than
it would
be
under
a
voluntary
system,
for
a
given
R.
This
means that
total
labor-mobility
costs,
as well
as the
total
implicit
income tax--both
of which
are
functions
of
N-
would
be
lower
under a
voluntary system.1
The
relationship
between
R
and
N can
be
stated
as follows:
1
1
N
=
-pN
+-pkN+R,
or
S
S
9.
In
principle,
W
could
exceed
M,
in
which
case
there
would
be
an
implicit
negative
ncometax
on,
or
positive
income
transfer
o,
draftees.
1.
Insofar as
there are
political
concerns
about
the
dangers
of
a
per-
manent
and
completely
professional
military
system,
t
would
not be desirable
to reduce
the
turnover
rates to
zero.
However,
the alternatives
are not
simply
a
zero
rate or the
high
current
rate;
rather,
there are
many
inter-
mediate
possibilities.
The
optimal
rate
would
require
a
balancing
of
the
political
and the cost
considerations.
t would
be
possible
o
rely
entirely
upon
a
voluntary ystem
and still
avoid
the
political
dangers
of
a
professional
ys-
tem
by
simply
requiring
he vast
majority
of
servicemen
o retire
after,
say,
ten years.
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R
N=
R
1-- (1
+ k)
8
where:
s
is
the
average
period
of
service
of
draftees,
in
months
(1/s
is
the
turnover
rate);
p
is the
training
period
for
draftees,
in
months;
k
is the ratio of
training
personnel
to
trainees;
and
N
and
R are as
previously
defined.
The
first term on
the
right-hand
side
of the first
expression
above
indicates the
number
of men
in
uniform who are
in
training
at a
given
point
of
time;
the
second
term indicates
the
number
of
instructors and
administrators,
which is assumed
to
be
a
fixed frac-
tion
of
trainees;
and the final term
indicates
the
number
of
ready
men.
It is
clear
from the
equation
that
if
the turnover
rate
(1/s)
were
reduced,
then N could be
reduced
for a
given R.
Or,
if
N were
held
constant,
R,
k,
or
p
could be
increased
-together
or
indi-
vidually
-
thereby raising the quantity or quality of ready military
personnel.
Thus,
additional
savings
would result from a
voluntary
system,
if
the
average
duration
of
service could be
lengthened.
III.
EMPIRICALAPPLICATION
In
this section
we estimate the
distributive effects and the
allocative costs
of
the
draft,
employing
the
model
just
described.
The estimates are based on three alternative sets of assumptions, in
order to
test
the
sensitivity
of the
estimates to
a
wide
range
of
pos-
sibilities. Each
assumption,
hereinafter
referred to as a
case,
in-
volves
a
different
interpretation
of
the
quality
of
military
man-
power
required,
but
in
all
cases
a
constant
number of
ready
men is
assumed.
The
three
cases are described
below.
Throughout,
the
potential
manpower
pool
is
regarded
as restricted
to those men
aged
eighteen
to twenty-four who are capable of meeting the physical and mental
standards established
by
the
military
services.2
Such
men
are
referred
to
as
eligibles
or
eligible
men.
Case
1: This
case
assumes
that the
military
productivity
of
men
differs
according
to their
quality
characteristics,
quality being
2.
This
age range
is used
only
to facilitate
the
empirical
work;
census
data
are
reported
for
this
age
bracket.
During
the
period
of the
early
sixties,
as well
as at the
time
of
this
writing,
the
actual
manpower
pool
was
from
age
181/2
to
26,
except
for
physicians,
whose
eligibility
continued
to
age
35.
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measured here
solely by
years
of
educational
attainment.
It
as-
sumes
further that all
men of
a
given
educational
level are
equally
adequate
to meet the needs
of the
services, provided they
are
eligible
men.
Finally,
it
assumes that
the
current
education-age
distribution
of
military
manpower
is to
be
maintained.
Case 2: An
objection
to Case
1
is
that
all
eligible
men of
a
given
age
and educational
level
may
not be
equally productive
in
service.
Thus,
whereas
Case
1 assumed that
educational attainment
alone
was
an
adequate
measure of
military-manpower
quality
for
all
men needed
by
the
services,
Case
2
assumes that
it is
an
adequate
measure
for only 75 per cent of them. For the other 25 per cent,
civilian
income
potential
is also
regarded
as
an
indicator
of
quality,
i.e.,
those
men
with
higher
income
potential
are assumed
to
have
higher
productivity
in
the
service.
And,
as
in
Case
1,
the
current
education-age
distribution
of
military
manpower
is
held constant.
Case
3: For
contrast,
a much
less
stringent
case
is
examined.
This
case
assumes
that the
military
services
find all
eligibles
equally
acceptable,
irrespective
of
differences
in
level
of
education
and
civilian incomes.3 We therefore relax the assumption that the cur-
rent
education-age
distribution
of
servicemen is
held
constant,
though
the
number of
men is
still
maintained.
For
each
of these
cases
-
that
is,
for
each
set
of
assumptions
about
military-manpower
quality
requirements-the
distributive
effects
and the
(labor-mobility)
allocative costs
are estimated.
The
manner in
which
this
is
done is summarized
below,4
by
presenting
empirical
counterparts
to
the
concepts
presented
in
Section
II
and
Figure I. The Sy curve in Figure I is now represented by the
cumulative
distribution of
actual civilian
incomes
of
males
aged
18-24
in
1959,
as obtained from
Census
publications,
but
adjusted
to
full-year
bases.
Actually,
five such
distributions,
S,
curves,
were
utilized,
one for each of five
level-of-education
groups:
0-8
years,
9-11
years,
12
years,
13-15
years,
and
16
or more
years.
The
positive intercept,
OA,
reflects
the
assumption
that
men with in-
comes below
that level
are
rejected
for
military
service. This
results
from the obviously simplifying assumption that those men unable
to
meet
physical
and mental
standards have the lowest
civilian
in-
come
opportunities
among
men
in
their
age
and
educational
group.5
3.
While
the
need for some
high quality
personnel
is
recognized,
it
may
be
assumed
that
such
personnel
are obtained
through
normal
enlistment
channels.
4.
Additional details
are
presented
in an
appendix,
available on
request
from
the
authors.
5.
The
education-specific
rejection
rates are:
grade
school
graduates
or
less-70
per
cent;
1-3
years high
school-32
per
cent; high
school
gradu-
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The
number of
men of each
quality,
y,
required,
ON
in
Figure
I,
is
the
difference between
the number of
draft-age
men in
the
services
and the
number
who
have
voluntarily
enlisted.
Since
such
volunteers
are
presumably
better
off because
of
their
choices,
we are
concerned
only
with the
remaining
group
when
estimating
the
distributive
effects
and
allocative costs
of
the draft
system.
This
remaining
group, numbering 650,000
in
fiscal
year
1963,
consists
of
182,000
draftees,
plus
an
estimated
468,000
draft-affected
en-
listees
who would
not have enlisted but
for
the existence of
the
draft.
Draft-affected enlistees
have
been estimated
to constitute 40
per
cent of total first enlistees.6
Let us
now
present
the
empirical
values
for
the
key
variables
shown
in
Figure
I.
In
doing
this,
we
shall
give
only
the
values
ag-
gregated
over all
education
groups; thus,
for
purposes
of the en-
suing
discussion,
the
AS,
curve
of
Figure
I
should
be
interpreted
as
a
summation of
the five
AS,
curves.
It
should
be
noted that our
empirical
method abstracts
from
any disutility
associated
with
employment
in
the
military
services. This
point
is
discussed further
in Section IV.
The
distance
OW, average
annual
compensation
(including
in-
come
in
kind)
of
draft-affected
men,
is
estimated at
$2400
in
1959.7
OV,
the mean
annual minimum
civilian income
per
male
aged
18-
24,
varies
with
educational
level,
but
averages
almost
$2100.
OM,
the mean
annual
gross foregone
income
per
draft-affected
man
currently
in
service,
also
varies
with educational
level,
but
averages
around
$3900.
Given the quality assumptions of Case 1, OABN, the smallest
total
foregone
civilian
productivity
at which ON
men
can
be
ob-
tained,
is
some
$1.3
billion
per year. Then,
assuming
that the
draft
system
takes
men
randomly
from within each of
the
five
distribu-
tions, ASy,
the
actual
foregone
civilian
productivity,
OMCN,
is
in
excess of
$2.5
billion
per year.
The
difference,
VMCD
(=
AMCB),
ates-
26
per
cent;
1-3
years
college--18 per
cent;
college graduates--16
per
cent;
overall
average-36
per
cent.
(Source:
unpublished
Defense De-
partmentdata.)
6. For a
full discussion
f
the
method
used
to
estimate the numberof
draft-affected
nlistees,
ee the
appendix
eferred
o
in
fn.
4,
p.
407.
7. The
$2,400
igure
appears
o have been
reasonably
onstant
between
1959
and
1962,
he
period
o whichour various
data
apply.
It
shouldbe noted
that the
$2,400
igure,
while
quite comprehensive,
oes
not
include
any
valuationof
training
received
in
service.
However,
to
the
extent that
draft-affected
men are
in
service
for
only
a rathershort
period,
any training-of
the sort that has value
in
the
civilian
economy-that
they
do
receive
may
not be
significantly
reater
han
the
on-the-job
raining
and
experience
eceived
by
civilian
workers. It is
only
this
difference
hat
shouldbe
addedto the
$2,400 igure.
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409
CONOMICS
OF THE
MILITARY
DRAFT
the estimated
excess allocative burden
of the
draft,
is
nearly
$1.2
billion
per
year,
as shown
in Table
I.
In Case 1 the distributive effect of the draft, the difference
between
actual service
income and
foregone
gross
civilian income
for
all
education
groups,
is OMCN
-
OWEN,
or
roughly
$2.5
bil-
lion
minus
$1.5
billion-
slightly
below
$1
billion
per year.
TABLE
I
ANNUAL
DISTRIBUTIVE
EFFECTS
AND
ANNUAL ALLOCATIVE COSTS
*
OF MILITARY DRAFT
SYSTEM,
TOTAL
AND
PER
MAN,
1959
(in dollars)
Total Costs
(millions)
Cost Per Man
Illustrative Case
Distributive Allocative Distributive Allocative
Effects Costs
Effects Costs
(1) (2)
(3)
(4)
Case 1
960
1,180
1,480 1,820
Case 2
960
870
1,480 1,350
Case
3
990
1,120
1,520
1,730
*Includes
only
labor-mobility
effect.
In
Case
2
the
distributive
effects
are identical
with
those in
Case
1,
since
in
both
cases
the
rate of
military pay
is
the
same,
and it is
assumed
that
the
draft
system
takes
men
at
random
from
within
each
distribution,
AS,. However,
the allocative
costs
are
substan-
tially
lower. For
it
is assumed
that
with
respect
to 25
per
cent
of
the men
selected,
the
difference between their
civilian and
military
productivity
is
zero;
and
the
military
is
assumed
to
require
this
fraction of high productivity (high income) men. In Case 1 no such
requirement
is
assumed
-
although
in
both cases
some
high
income
men are
obtained
through
the random
selection
process.
We
turn now to
Case
3.
If
military
manpower
needs were
simply
for men
who
could
meet
the induction
standards
of
1963
-
the
year
to
which our
manpower
data
apply-
then
qualitative
characteristics such
as
education
and
civilian income
(productivity)
opportunities
could
be
disregarded.
In
this
case, application
of our
model would require only a single distribution of earnings for all
men
eighteen
to
twenty-four
and
an
aggregate
rejection
rate. The
procedure
for
estimating
labor-mobility
allocative
costs
and
distri-
butive
effects
is
then identical with that used
in
Case 1.
Table
I
shows,
somewhat
surprisingly,
that these
costs
and
effects
are
very
nearly
the same for Cases
1
and
3. Two
forces
operate
to
produce
this result for the allocative
costs.
First,
be-
cause the
educational distribution
of
military
personnel
does
not
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differ
significantly
from
that for all
males
in
the
draft-age group,
the
level
of
foregone
civilian
earnings
in
Case
3
is
very
close to
that
in
Case
1.
Second,
the fact that
in
Case
3
the
minimum-earnings
cut-
off
(NB
in
Figure
I)
is
implicitly
the same for all education
groups,
while
it
varies
from
group
to
group
in Case
1,8
gives
rise to
only
a
small
change
in
the
minimum
opportunity
cost
of
the draft.9
The
net
impact
of
these
forces
causes
a
slight
reduction
in
total
alloca-
tive
cost in
Case 3.
The distributive
effect
differs
slightly
in Case
3
(relative
to both Cases
1 and
2),
because
civilian
incomes
(op-
portunity
costs)
change
as
a
result
of
dropping
the
assumption
that
the
current
education mix is
held
constant.
In
reviewing
the results of
Table I--the
range
of which
is
rather modest
-
three
points
should be
remembered.
(1)
Only
those
distributive effects
of
the
military
draft
system
resulting
from
the
implicit
income
tax
which
the draft
imposes,
and
only
those
alloca-
tive
costs
of the
military
draft
system
stemming
from restrictions
on
labor
mobility,
have been considered.
(2)
The distributive
effects
and allocative
costs
shown
are not
additive,
since
the
latter
are real costs, while the former are transfers. (3)
All
of
the
esti-
mates
are
based
on 1959
income
data,
even
though
the
1963
dis-
tribution
and mix
of servicemen
are
used.
In
deriving
the results
presented
in Table
I it was
pointed
out
that
the number
of men
required
for
the
services
was
held constant.
However,
it
was also
pointed
out
earlier
in the
paper
that if
we
assume
that the
number
of
ready
men,
rather
than
the total
number
of men
in
service,
is
to
be held
constant,
then
a smaller
total num-
ber of servicemen would be required if the rate of turnover could be
reduced
-
as it would
be
under a
system
offering
more attractive
rates
of
compensation.
At
this
point
we use
the turnover
model
presented
in
Section
II to
re-estimate the values
in Table
I,
under several
different
as-
sumptions
about
the
relevant
parameters
of the
model.
If
in this
model we hold
all
variables
constant
at
their
current
values,
and
allow
only
length
of
service,
r,
to
increase
-
as it
would
if the turn-
8. The minimum average (per draftee and nonvoluntary enlistee) income
that would
have
to be
paid,
or-
equivalently--the
minimum civilian
pro-
ductivity
that would have to
be
foregone
in
order
to obtain
the 1963
num-
bers
of men
with
the 1963
educational
attainments,
is as follows:
grade
school
-$2,980;
1 to 3
years
of
high
school-$2,100;
high-school
graduate-
$2,050;
1
to 3
years
of
college--$1,630;
college graduate-$1,680;
and a
weighted
total--
$2,060.
One
possible
implication
of
differential cutoffs
is
discussed
in
Section
IV.
9.
The
minimum
income cutoff
for all men is
$2,010.
This
cutoff
must
fall
below the
$2,060 figure
referred
to
in the
previous footnote,
because
a
uniform cutoff
minimizes
the
aggregate
minimum
foregone
income
(opportunity
costs)
for the
given
level of
manpower
obtained.
410
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411
over rate
were
cut
-
then
the number of
men
needed, N,
is
reduced
by
the amounts indicated in column
1
of Table II.
Columns
3
and
4
indicate
how
much
the total
labor-mobility
allocative costs
and
the
total
distributive effects
shown
in Table
I
would
be
reduced as
duration
of
service is
increased. It
should
be borne
in
mind that
average
duration of service
could
be
increased
in
various
ways,
not
only by
enlarging
rates
of
compensation,
but also
by
extending
the current
two-year
draft
period.
TABLE II
ANNUAL ALLOCATIVEAND DISTRIBUTIVE EFFECTS OF. REDUCED
TURNOVER
OF
MILITARY MANPOWER
Reduction
in Number of
Draft-Affected
Men
in Annual Reduction
*
in
Service
(compared
with
Average
Years
the
650,000
in
service
Allocative Distributive
of
Service
in
1963)
Costs Effects
(in
millions (in
millions
Total
Per
cent
of
dollars)
of
dollars)
(1)
(2)
(3) (4)
2
0 0
0
0
3 36,000 6 66 53
5
62,000
10
113
92
10
80,000
12
146
118
20
86,000
13
157
127
*
From
total amounts
shown in Table I for
Case
1.
IV.
SOME
EXTENSIONS OF
THE ANALYSIS
In this section we point out several implications of the con-
cepts
and
findings
discussed
in
this
paper.
Our
objective
is to be
provocative
and to
suggest
questions
for further
investigation,
rather
than to offer definitive conclusions.
Particular
caution should be
exercised
in
interpreting
the
quantitative
results in this
section,
for
they
are
crude,
being
based
on
incomplete
data and
assump-
tions that
may
require
reconsideration.
Nevertheless,
some
of
the
results
are indeed
striking
and
may
warrant
further
refinement.
A.
The
Relative Value
of
Educated
Manpower
to the Civilian
and
Military
Sectors
If
it is assumed that
the
military
services have
the
educational
mix
of men
that is
optimal,
in the
sense
of
equating
the
marginal
military productivities
of
men in
all of the
educational
classes,
then
the
findings
in
Part
III
(including
footnote
8,
p.
410)
concerning
differential
earnings
cutoffs
imply
that a
college-educated
man who
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can
earn as
little
as
$1600
per
year
in the civilian
economy
is
just
as
valuable
in the service
as
the
elementary
school educated
man
who
can
earn
as
much as
$3000
in the civilian
economy.
Thus,
formal
education
is
being
treated
as
relatively
more valuable in the
military
service than
it is
in
the
civilian
economy.
In
a
modern
military
system
such
a
conclusion is not
implausible,
if
it is true
that the
technology
now
employed by
the
military
is
more
demand-
ing
of the
skills
of well-educated
men than
is the
average technology
employed
in
the
civilian
sector.
Some
notion as
to
whether the
military
services
are
using
more
advanced
technology
than
the
civilian
economy
in
general might
be
obtained
by
determining
whether the
capital/labor
ratio
in the
military-service
sector
is
higher
than
it
is
in
the civilian
sector
of
the
economy.
If
it
is,
we would seem
to have
found
a
justifica-
tion
for the observed
differential
income cutoffs
according
to
educa-
tional
attainment.
The
data
shown
in Table
III on
capital/labor
ratios
for the
military
versus
the civilian
sectors
of
the
economy
are
consistent
with the hypothesis that the ratio of physical capital to labor is
higher
in
the
military
sector.
Measured
by
gross
capital
stock
per
man,
in
constant
dollars,
the
military
capital/labor
ratio
is
double
that
for the civilian
sector.
Measured
by
net
capital
stock
2
per
man,
in
constant
dollars,
the
military
capital/labor
ratio
slightly
exceeds
that
for the
civilian sector.3
Another
test
might
involve
making
a
comparison
of
the
occupa-
tional
distribution of
servicemen
(and
particularly
the
army)
with
that for the labor force as a whole. Unfortunately, the needed data
are not
available,
but
if
they
were,
we would
expect
to
find a
higher
proportion
of
military
personnel
concentrated
in
heavily
capital-
using occupations.
In
summary,
the
available
data do
not
run
counter to
the
notion that
military
technology
is
more
capital-using
and
thus,
perhaps,
more
demanding
of
the
skills
of
at
least some better
educated
men.
But
additional work
is
required
to
give
this con-
clusion a firmer basis.
1.
Undepreciated apital
stock;
for a discussion
of
this
concept
see
Raymond
W.
Goldsmith,
The National Wealth
of
the
United
States
in
the
Postwar
Period
(Princeton:
Princeton
University
Press,
1962).
2.
Gross
capital
stock
less
capital
consumption
llowances.
3. It is
worth
pointing
out that from
the
mid-1950's
ntil
at least
1958,
military
capital/labor
atios
were
rising
more
rapidly
than were those
in
the
private
economy.
For
example,
rom
1955
to
1958
the
military capital/labor
ratio
rose
by
about 13
per
cent
on
a
net
capital
stock basis
(or
11
per
cent
on
a
gross
basis),
as
contrastedwith
a
5
per
cent
rise on a
net
basis
for the
civilian
ratio.
For
data,
see
the source
or
Table
III.
412
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TABLE
III
CAPITAL/LABOR
RATIOS,
CIVILIAN
AND
MILITARY
ECTORS,
958
(in
constant
1947-49
prices)
Capital
Stock
Labor Force
Sector
(in
$
billions)
(in
millions)
Ratios
Gross
Net
Gross
(1)/(3)
Net
(2)/(3)
(1)
(2)
(3) (4)
(5)
Military
130 44 2.6
50
17
Civilian
1,715
1,022
68.6 25 15
Sources: Capital Stock: Raymond W. Goldsmith The National Wealth of the United
States
in
the Postwar
Period
(Princeton:
Princeton
University
Press, 1962).
Tables
B-172
(sum
of cols.
1-3)
and
B-174
(sum
of cols.
1-3)
for
military, gross
and
net,
respectively;
and
Tables A-26
(col.
1)
and
A-28
(col.
1),
for
civilian,
gross
and
net,
respectively.
Labor Force: Economic
Report of
the
President,
Jan.
1966,
Table C-20.
B.
The
Military
Manpower
Supply
Curve
One of
the
analytical
tools
developed
in
this
paper
can be
used
to shed
light
on the
nature
of the
supply
curve
for
military
man-
power
and
on
the
extent of aversion
to
or
preference
for
military
service
as
compared
with civilian
employment.
The
key
concept
is
the
opportunity
cost
curve
portrayed by
AS,
in
Figure
I.
This
curve can be
interpreted
as
a
special
type
of
labor
supply
function
for
military
manpower,
under
the
assumption
that
men will
work
for
whatever
employer-military
or
civilian-pays
the most
(either
in
cash or
in
kind)
or,
in
other
words,
that men
have neither
an aversion
to
nor
preference
for
military
employment.
In
this
sec-
tion we present this type of special labor supply curve based on an
aggregate
of
Sy
curves
in
Figure
I,
and
subsequently
use it
to
de-
velop
several estimates
of actual labor
supply
curves.
The
first
problem
is
to
determine the
shape
of
the
opportunity-
cost
(supply)
curve
for
the
relevant
range
-
namely,
between
the
number
of enlisted
men of
draft
age
currently
in
the services
and
the
number that
we estimate would
be
in
the service
voluntarily
(i.e.,
if
there
were
no
draft).
This
range,
650,000,
is the number of men
for whom supply responses to wage increases are important.
In
Figure
II,
AS*y
portrays
this
opportunity-cost (supply)
curve. Point
A
indicates
that if additional
men of
acceptable
quality
are to be
obtained, they
will have
to be obtained at a
civilian
op-
portunity
cost of at least
$1800.4
The
remainder
of the
curve
AS*y
4.
This follows
from our
assumption
that
rejectees
have the lowest
civilian
income
opportunities
i