"Compulsory military service allows the government to fool...

Name: Problem 4, Chapter 7: Economics
Uploaded: 2021-08-02T20:41:37-08:00
Duration: 3 min 8 s
Channel: Kaylee Mcclellan
Description: "Compulsory military service allows the government to fool itself and the people about the true cost of a big army. - Compare the budget cost and the opportunity cost of a voluntary army (where army pay is high) with those of compulsory service (where pay is low). What does the concept of opportunity cost contribute to analyzing the quotation?

"Compulsory military service allows the government to fool itself and the people about the true cost of a big army. - Compare the budget cost and the opportunity cost of a voluntary army (where army pay is high) with those of compulsory service (where pay is low). What does the concept of opportunity cost contribute to analyzing the quotation?

Key Concepts

Opportunity Cost

Opportunity cost is a fundamental economic principle that measures the value of the next best alternative that is forgone when a particular decision is made. It highlights that the true cost of any decision includes not only the explicit financial outlay but also the benefits and opportunities lost by not investing those resources elsewhere. In the context of military service, relying solely on direct budget expenditures may underestimate the hidden costs associated with the choices between compulsory and voluntary service.

Budget Cost

Budget cost refers to the explicit, recorded spending that is directly visible in government accounts, such as salaries and operational expenses. This cost is easily quantifiable and typically forms the basis for traditional budgetary analysis. However, when comparing different forms of military service, budget costs may not capture the full economic impact, as they do not consider the lost alternatives or potential gains that are encompassed by the concept of opportunity cost.

Transcript

00:01 In this question, we are taking a look at voluntary armies and compulsory armies, and mainly the differences in pay.

00:06 So a compulsory army is going to have lower pay, whereas voluntary army will have higher pay.

00:12 And we're analyzing this based upon the quotation and the question, the fact that a government might fool itself and its people about the actual cost of a big army by choosing to have a compulsory army, therefore with low pay.

00:23 But in order to understand this, we need to look at the budget cost and the opportunity cost.

00:28 So comparing these, if we start with the voluntary armies, so that with high pay, the budget cost here is going to be fairly high because of what the army is actually being paid.

00:38 So we'll have a fairly high budget cost.

00:41 But if we then look at the compulsory army with lower pay, there's going to be a much lower cost because the army is just simply not being paid as much.

00:49 So what we see on paper in terms of the budget cost will be lower.

00:53 But if we look at the opportunity costs now in terms of a voluntary army with high pay, we have to take into account what would be that next best alternative.

01:02 So in this case, the opportunity cost of maybe paying them that amount means that the government can't allocate those funds elsewhere.

01:13 So we may see lower standards of living elsewhere potentially, wherever those funds might have gone had they not gone to the army...

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