What level of defence spending should we adopt, and how should we fund it? What level of political support can we expect from the public for such spending? These questions are all the more pressing given that defence spending is set to rise significantly in the coming years, with a view to ensuring the European Union’s strategic autonomy and sovereignty.
National defence is the classic example of a pure public good. We draw on the insights of pure public goods theory to identify the challenges associated with the effective provision and funding of national defence. Several key lessons emerge: (i) citizens’ willingness to finance national defence through taxation depends on the design of redistribution policies; (ii) Pareto efficiency requires the preferences of taxpayers providing funding for public goods via the tax system to be taken into account; (iii) an increase in defence spending may be accompanied by greater redistribution; (iv) Uncertainty regarding citizens’ willingness to increase their contribution to defence funding gives rise to uncertainty about the political feasibility of such reforms.
