Misapplying the opportunity-cost principle

Calls to divert defence investment elsewhere citing the opportunity-cost principle generally ignore the risk management principle that provides the necessary context for any prudent opportunity-cost decisionmaking.

 

Letter to The Canberra Times 
Monday, 07 March 2016
(published Thursday, 10 March 2016)

Apparent complacency is no excuse to inflict even greater inter-generational inequity on our descendants by not shouldering our fair share now of the long-term investment required in our national defence.

Rod Price’s call (Letters, March 5) to divert even more defence investment elsewhere ignores or unduly discounts long-term risk management principles.

Long periods of relative peace are optimal in opportunity-cost terms for moderate but sustained investment in our national defence infrastructure, and our diplomatic capacities, to deter and manage a wide range of serious strategic risks to our national interests over many decades hence.

The potential cost of one day losing our strategic freedom of action as a nation, however unlikely this might seem to some at any one time now, far outweighs the relatively minimal national investment we make in our common defence.

At only 7.5 per cent of (only) the Commonwealth budget, Rod also ignores that this investment is already dwarfed by federal and state spending on each of social security, health and education.

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