LIST OF NOBEL LAUREATES IN ECONOMICS

List of Nobel Memorial Prize laureates in Economics

Collected by Dr.Debesh Bhowmik 

 

The Nobel Memorial Prize in Economic Sciences, officially known as The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (Swedish: Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is awarded annually by the Royal Swedish Academy of Sciences to researchers in the field of economics. Although not one of the original five Nobel Prizes established by the 1895 will of Alfred Nobel, it is consistently identified with them. The award was established and funded in 1968 by the Sveriges Riksbank, the central bank of Sweden, on the 300th anniversary of the bank, and has been awarded annually since. The first award was given in 1969 to Ragnar Frisch and Jan Tinbergen. Each recipient receives a medal, a diploma and a monetary award that has varied throughout the years. In 1969, Frisch and Tinbergen were given a combined 375,000 SEK, which is equivalent to 2,871,041 SEK in December 2007. The award is presented in Stockholm at an annual ceremony on December 10, the anniversary of Nobel's death.

As of late 2013, 45 Nobel Memorial Prizes in Economic Sciences have been given to 74 individuals. Seven awards have been given for contributions to the field of macroeconomics, more than any other category. The institution with the most affiliated Nobel laureates in Economics is the University of Chicago, which has 28 affiliated laureates.

Laureates

Year	Laureate		Country	Rationale
1969		Ragnar Frisch	Norway	"for having developed and applied dynamic models for the analysis of economic processes"
		Jan Tinbergen	Netherlands
1970		Paul Samuelson	United States	"for the scientific work through which he has developed static and dynamic economic theory and actively contributed to raising the level of analysis in economic science"
1971		Simon Kuznets	United States	"for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development"
1972		John Hicks	United Kingdom	"for their pioneering contributions to general economic equilibrium theory and welfare theory."
		Kenneth Arrow	United States
1973		Wassily Leontief	Soviet Union	"for the development of the input-output method and for its application to important economic problems"
1974		Gunnar Myrdal	Sweden	"for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena."
		Friedrich Hayek	United Kingdom / Austria
1975		Leonid Kantorovich	Soviet Union	"for their contributions to the theory of optimum allocation of resources"
		Tjalling Koopmans	United States / Netherlands
1976		Milton Friedman	United States	"for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilisation policy"
1977		Bertil Ohlin	Sweden	"for their pathbreaking contribution to the theory of international trade and international capital movements"
		James Meade	United Kingdom
1978		Herbert A. Simon	United States	"for his pioneering research into the decision-making process within economic organizations"
1979		Theodore Schultz	United States	"for their pioneering research into economic development research with particular consideration of the problems of developing countries."
		Arthur Lewis	United Kingdom
1980		Lawrence Klein	United States	"for the creation of econometric models and the application to the analysis of economic fluctuations and economic policies"
1981		James Tobin	United States	"for his analysis of financial markets and their relations to expenditure decisions, employment, production and prices"
1982		George Stigler	United States	"for his seminal studies of industrial structures, functioning of markets and causes and effects of public regulation"
1983		Gérard Debreu	France	"for having incorporated new analytical methods into economic theory and for his rigorous reformulation of the theory of general equilibrium"
1984		Richard Stone	United Kingdom	"for having made fundamental contributions to the development of systems of national accounts and hence greatly improved the basis for empirical economic analysis"
1985		Franco Modigliani	Italy	"for his pioneering analyses of saving and of financial markets"
1986		James M. Buchanan	United States	"for his development of the contractual and constitutional bases for the theory of economic and political decision-making"
1987		Robert Solow	United States	"for his contributions to the theory of economic growth"
1988		Maurice Allais	France	"for his pioneering contributions to the theory of markets and efficient utilization of resources"
1989		Trygve Haavelmo	Norway	"for his clarification of the probability theory foundations of econometrics and his analyses of simultaneous economic structures"
1990		Harry Markowitz	United States	"for their pioneering work in the theory of financial economics"
		Merton Miller	United States
		William Forsyth Sharpe	United States
1991		Ronald Coase	United Kingdom	"for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy"
1992		Gary Becker	United States	"for having extended the domain of microeconomic analysis to a wide range of human behaviour and interaction, including non-market behaviour"
1993		Robert Fogel	United States	"for having renewed research in economic history by applying economic theory and quantitative methods in order to explain economic and institutional change"
		Douglass North	United States
1994		John Harsanyi	United States	"for their pioneering analysis of equilibria in the theory of non-cooperative games."
		John Forbes Nash	United States
		Reinhard Selten	Germany
1995		Robert Lucas, Jr.	United States	"for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy"
1996		James Mirrlees	United Kingdom	"for their fundamental contributions to the economic theory of incentives under asymmetric information"
		William Vickrey	United States / Canada
1997		Robert C. Merton	United States	"for a new method to determine the value of derivatives."
		Myron Scholes	Canada / United States
1998		Amartya Sen	India	"for his contributions to welfare economics"
1999		Robert Mundell	Canada	"for his analysis of monetary and fiscal policy under different exchange rate regimes and his analysis of optimum currency areas"
2000		James Heckman	United States	"for his development of theory and methods for analyzing selective samples"
		Daniel McFadden	United States	"for his development of theory and methods for analyzing discrete choice"
2001		George Akerlof	United States	"for their analyses of markets with asymmetric information"
		Michael Spence	United States
		Joseph E. Stiglitz	United States
2002		Daniel Kahneman	Israel / United States	"for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty"
		Vernon L. Smith	United States	"for having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms"
2003		Robert F. Engle	United States	"for methods of analyzing economic time series with time-varying volatility (ARCH)"
		Clive Granger	United Kingdom	"for methods of analyzing economic time series with common trends (cointegration)"
2004		Finn E. Kydland	Norway	"for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles."
		Edward C. Prescott	United States
2005		Robert Aumann	Israel / United States	"for having enhanced our understanding of conflict and cooperation through game-theory analysis."
		Thomas Schelling	United States
2006		Edmund Phelps	United States	"for his analysis of intertemporal tradeoffs in macroeconomic policy"
2007		Leonid Hurwicz	Poland / United States	"for having laid the foundations of mechanism design theory"
		Eric Maskin	United States
		Roger Myerson	United States
2008		Paul Krugman	United States	"for his analysis of trade patterns and location of economic activity"
2009		Elinor Ostrom	United States	"for her analysis of economic governance, especially the commons"
		Oliver Williamson	United States	"for his analysis of economic governance, especially the boundaries of the firm"
2010		Peter A. Diamond	United States	"for their analysis of markets with search frictions"
		Dale T. Mortensen	United States
		Christopher A. Pissarides	Cyprus
2011		Thomas J. Sargent	United States	"for their empirical research on cause and effect in the macroeconomy"
		Christopher A. Sims	United States
2012		Alvin E. Roth	United States	"for the theory of stable allocations and the practice of market design."
		Lloyd S. Shapley	United States
2013		Eugene Fama	United States	"for their empirical analysis of asset prices."
		Lars Peter Hansen	United States
		Robert J. Shiller	United States

INDIA-BRAZIL-SOUTH AFRICA:THE SOUTHERN TRADE POWERHOUSE MAKES ITS DEBUT

 

INDIA-BRAZIL-SOUTH AFRICA: THE SOUTHERN TRADE POWERHOUSE MAKES ITS DEBUT

By: COHA Research Associate Kaia Lai

March 15, 2006 · in Brazil, Front Page, Press Releases

• New alliance of regional giants slowly gains strength
• India, Brazil, and South Africa (IBSA) spearheads south-south co-operation
• IBSA presses issues of poor nations’ development in WTO and UN debates
• Economic cooperation remains the largest challenge
• Only another elite debating society?

In the face of mounting pressures to develop an alternative option to globalization—one that emerges from a developing world perspective and prioritizes egalitarian advancement, technological cooperation, and an end to global marginalization of the poor nations—there has been a new push to redefine political and economic arrangements springing from Bretton Woods. One component of these many recent initiatives is the idea of south-south cooperation. This southern perspective, while not a new concept, has by no means even been partially realized.

The fostering of transatlantic links between South Africa and Latin America began in the post apartheid period with the creation of the Zone of Peace and Cooperation in the South Atlantic (ZPCSA) in 1986, and recently, steps have been taken to vitalize this incipient southern alliance. The foundation for this was set when the leaders of three regional goliaths, India’s Vajpayee, Brazil’s Lula, and South Africa’s Mbeki spearheaded a new approach to south-south cooperation at the 2003 UN General Assembly Forum, resulting in a trilateral India-Brazil-South Africa agreement.

These countries have initiated a dialogue based on mutual enrichment for the developing world, and are increasingly prioritizing the entrance of developing countries into the competitive world market through loosening their bonds with the U.S. and other rich nations, while forging stronger ties amongst themselves. Yet, IBSA is still merely an infant body that has yet to even fully tally up its objectives. Although, politically it boasts the outline of a bold international stance, IBSA’s future viability relies on its reaching beyond moral and symbolic congruencies to enter into bold trade and technological cooperation ventures among themselves and other developing societies.

Conceptualizing IBSA
A trilateral agreement seems like a logical step for countries that are preparing to go beyond merely committing themselves to amplifying their emotional, political and historical relations. South Africa and Brazil had shared similar histories of racial tension, inherent inequality, and abnormally high Gini indexes (Brazil is currently sitting at 59.7 [2004 est.] and South Africa at 59.3 [1995 est.], based on a scale from 1 to 100, with 100 marking the most economically unequal society). South African and Indian relations date back at least to Mahatma Ghandi’s work for the rights of indentured Indian laborers sent to South Africa a century ago, India’s support of South Africa’s long struggle against apartheid, and the development of the Indian National Congress, with its important solidarity links to the African National Congress (the dominant South African party today). Furthermore, an existing bilateral preferential trade agreement between the South African Community (SACU) and South America’s MERCOSUR (which is now being expanded to encompass liaison connections between India and MERCOSUR), along with a strong legacy of trade between South Africa and India, make for an increasingly important partnership.

IBSA as a Political Cause
The initial purpose of IBSA was to create a loose alliance that could present a cohesive voice at the bargaining sessions anticipated for the Doha Rounds, and which would exert pressure on the rich nations in order to achieve common positions in UN Security Council deliberations. IBSA has further amplified its presence in an annual dialogue involving the foreign ministers of India, Brazil, and South Africa to discuss the development issues and the possibility of joint approaches in dealing with the Eight Millennium Development Goals, which the IBSA members actively support.

The foreign ministers of India, Brazil, and South Africa attended the first IBSA Dialogue Forum, held in New Delhi on March 4 and 5 of 2004. Issues addressed included social development, disarmament, infrastructure, health care, sustainable economic development, and poverty alleviation. The ministers supported the integration of bilateral preferential trade agreements among the three members into one trilateral agreement, stressing the goal of mobilizing multilateral processes in the globalizing world that could be seen as sympathetic to the south.

The second IBSA Dialogue Forum, held in Cape Town on March 10 to 11 of 2005, reaffirmed the issues presented in the first dialogue and focused on IBSA’s potential influence on the global political and economic scene. At Cape Town, the ministers discussed the need for UN reform, equitable WTO treatment of developing nations, south-south political cooperation, development, and economic integration. Environmental issues such as sustainable development and mobilizing an integrated response to issues such as climate change were revisited, as were geopolitical factors such as the non-proliferation of weapons of mass destruction and terrorism. Poverty alleviation also remained of great concern for the ministers, who pledged to donate modest contributions to the IBSA development fund to support projects aimed at improving living standards. And while the financial heft of this fund remains relatively inconsequential, its symbolic meaning, following the trend of IBSA itself, is quite substantial. The third meeting was scheduled for this month, and its outcome will hopefully give a clearer indication of the organization’s future path.

Since its inception in 2003, IBSA has progressed from a loose partnership constructed mainly to address political issues in macro terms, to a functioning alliance that seeks to discuss and resolve specific worldwide questions prevalent among developing countries. These include the growth of democracy, disarmament, environmental sustainability, and maritime ties that have emerged as some of the principle agenda items for discussion among the three nations. Garth le Pere, Director of the Institute for Global Dialogue, and Lyal White, Latin American researcher at the South African Institute for International Affairs (SAIIA), claim that the “common challenges of poverty alleviation, economic development and social equity” hold the coalition together. In fact, soon after its inception, IBSA partnered with the UNDP to develop a trust fund to financially back the goal of worldwide poverty alleviation. Meanwhile, we are witnessing the slow but very important institutionalization of that body.

IBSA’s three members are universally seen as being the principle powers in their respective parts of the world and are, therefore, in a position to comprehend their weaker neighbors’ needs in current trade deliberations. Although IBSA’s goals are similar to those of organizations like the G20 and G77, it has the potential to act more effectively, as decisions will be debated among three countries, rather than twenty, or even seventy. In an interview with COHA, Derek Moyo, Deputy Chief of Mission at South Africa’s Washington DC embassy, stressed that IBSA is a much more efficient body than larger forums, and may have a greater capability to impact the UN Security Council by playing a balancing role against that body’s five permanent members—the U.S., China, France, the Russian Federation, and the U.K.

Barriers to a Single Market
IBSA, as a unifying factor in the international community, has performed well in the political arena, effectively negotiating at various trade summits. However, the trilateral agreement has yet to achieve critical mass in the institutionalization process. While IBSA possesses substantial symbolic heft, more concrete achievements must be made in its future. Although India, Brazil, and South Africa participate in bilateral trade amongst themselves, binding trilateral free trade arrangements between the countries are not an option at the present time because of previously signed multinational agreements involving their neighboring nations. Organizations such as SACU and MERCOSUR prohibit individual members from forming a free trade agreement with any outside nation without extending the newly expanded free trade area and its benefits to other existing members.

Existing restrictions on imports and tariffs are quite high; for example, Brazil imposes a flat 60 percent tax on all manufactured imports. Additionally, Argentina, a MERCOSUR partner, is apprehensive of South Africa’s wine industry flooding the South American market. In Moyo’s opinion, opening up trade within IBSA would be beneficial overall, but would require a long and intricate process of targeted negotiations to reassure the security of existing business interests within each nation. If, in the future, the IBSA countries decide to create a broadened free trade agreement, it may come to fruition in the form of a multilateral SACU, MERCOSUR, and ASEAN agreement. According to the SAIIA, IBSA encompasses a total population of 1.3 billion people and an economy of $1.26 trillion. The above numbers would be only a fraction of the potential combined population and economy that would come into existence if current regional blocs were incorporated into one gigantic grouping. However, at this time, the foundations for such a move are shaky at best, and it appears unlikely that a larger south-south alliance will be permitted to emerge at this point.

Impediments to Bloc Building
There have been no trilateral free, or even preferential, trade ties among the three members. In fact, South Africa’s trade with Brazil comprises only 2 percent of its total foreign trade. One research institute from each country—the SAIIA, the Indian Consumer Unity and Trust Society (CUTS), and the Brazilian Institute for International Trade—have been entrusted with the responsibility of conducting research and compiling reports for their upcoming summit addressing the benefits and repercussions associated with openly linking the members’ economies into a single market. This project has included a survey of public and private sector responses to a possible trade pact. Some claim that there is a lack of communication between public and private sectors with respect to IBSA’s ability to significantly affect the current markets. Moyo explains that, when discussing a trade arrangement, there are always certain sectors that will protest relaxed trade barriers for self-serving reasons. For IBSA to expand into complex trade relationships, business sectors located in the three countries will have to be prepared to cooperate with each other in creating rationalized trade arrangements that could prove mutually beneficial.

Furthermore, South Africa significantly trails the other two countries in exports, especially those relating to value-added commodities. In fact, export flows from MERCOSUR to South Africa are five times larger than the reverse, and, specifically with Brazil, South Africa’s trade is at a disadvantage of one to four. Although South Africa’s per capita income tops India’s and Brazil’s, its economy is less than one-third the size of other two. Additionally, South Africa’s total trade at $70 billion is around $60 billion less than either India’s or Brazil’s. Moreover, South Africa faces other trade disadvantages with both of its partners, from an economic as well as an efficiency standpoint. However, Moyo claims that opening the borders of the three countries will help South Africa to catch up in its manufacturing sector. He acknowledges that “their export packages have more manufactured goods than ours…and ours is still predominantly made of minerals…[but] it is that dynamic that we want to change…because it’s companies that do business, not governments.” Some international business specialists maintain that South Africa has the greatest potential to benefit from the export of its agricultural products, auto parts, and chemicals. But as of yet, IBSA’s economic components have been built on existing bilateral agreements some at the encouragement of the three countries’ business sectors, which have met such integration prospects with enthusiasm.

Current Initiatives
While a preferential trade pact in the near future is still far from certain, IBSA nevertheless has made strides elsewhere. In the tourism industry, many are seeing the idea of IBSA’s existence as providing a compelling opportunity and a strong selling point. According to Nalini Gupta, head of the South African Airlines (SAA) branch in India, regional airlines are looking into tri-destination travel packages, and SAA is already expanding its flights among the three nations.
At the beginning of March, IBSA agreed to forge cooperation in the agricultural sectors and technology. The Indian daily, New Kerala, states that the two-day trilateral discussions held last month produced an agreement to work collectively on agricultural issues such as “germplasm exchange and enhancement; research and technology including plant breeding for sustainable food production; nutritional and environmental security; use of frontier technologies for livestock and poultry health management, and breeding quality improvement; efficient management of natural resources; technology transfer-capacity and competence building; fish augmentation of productivity and value addition through processing and small farm mechanization and agro processing tools and techniques.” At the meeting, a draft of an official agricultural cooperative agreement was circulated and will be voted upon by the three governments in this month’s annual IBSA summit.

Agriculture has always been a sore subject for developing countries, mainly because of Washington’s insistence on maintaining its federal subsidy program. Developing countries have suffered an estimated $100 billion in annual loses due to limited sales resulting from the developed countries’ agriculture subsidy programs. IBSA has helped to lead the fight against such inequalities, taking strong stances over the issue at WTO meetings. In negotiations last October, the U.S. for the first time, agreed to consider lowering its agricultural subsidies after years of pushing the EU to lower theirs. At an IBSA colloquium on October 2005, Satyabrata Pal, India’s High Commissioner to the organization, expressed IBSA’s potential ability to influence the path of the Doha Round. He claimed that “we were able to make [a] common cause in the Doha Round of WTO talks, and that made it impossible for the EU and U.S. to force on the developing world a deal cobbled together between them.” IBSA, along with the G4 (comprising India, Brazil, South Africa, and China) and the G20, has been instrumental in an effort to develop a “middle ground” on trade negotiations. And it seems to be determined to continue along this path, as demonstrated by Minister of State for External Affairs Anand Sharma’s visit to Brazil earlier last month to further discuss proposed UN reforms.

What does the future hold?
Unique as a transcontinental agreement among several far-flung members of the developing world appears to be, IBSA seems to have less common political ground than your average regional organization. However, the three countries have linked what they do have in common, namely socio-economic conditions and political positions within their respective regions, to promote their internal strengths. In order to tailor a mutually beneficial framework, IBSA can be effective if the organization focuses on commonly held issues and works to realize goals within spelled-out categories. IBSA has been, and will likely continue to be, an increasingly successful political format representing the interests of these three emerging regional behemoths with worldwide responsibilities.

Satyabrata Pal admonishes his listeners that IBSA should not be merely another “diplomatic debating society.” However, its expansion into being a transcending factor in global trade seems to be some distance off, as a preferential trade agreement will have to be negotiated, not just between the IBSA countries, but among their likeminded counterparts in other free trade relationships as well. Overall, IBSA has yet to discover its final identity, and this disclosure will go a long way to determine the future viability of global-south synergy as embodied in IBSA. Yet, the headway that these countries are making is quite impressive. By tapping into interdependency among the most capable states to be found in three southern geographic areas, IBSA is helping to lead relations between the new organization and other developing countries to be found within their respective geographical regions, while working to solve a variety of ills and socio-economic problems plaguing both their immediate and more distant neighbors.

US MILITARY SPENDING

US Military spending

--Dr.Debesh Bhowmik

Military budgets are only one gauge of military power. A given financial commitment may be adequate or inadequate depending on the number and capability of a nation's adversaries, how well a country invests its funds, and what it seeks to accomplish, among other factors. Nevertheless, trends in military spending do reveal something about a country's capacity for coercion. Policymakers are currently debating the appropriate level of U.S. military spending given increasingly constrained budgets and the winding down of wars in Iraq and Afghanistan. The following charts present historical trends in U.S. military spending and analyze the forces that may drive it lower.

The data from the Stockholm International Peace Research Institute (SIPRI) and from the U.S. Bureau of Economic Analysis (BEA) include spending on overseas contingency operations as well as defense. This distinguishes them from data used in the U.S. budget, which separates defense spending from spending on overseas operations. In inflation-adjusted dollars, SIPRI's measure of U.S. military spending rose sharply after the terrorist attacks of 2001. In calendar year 2012, military spending declined from $711 billion to $668 billion. In dollar terms, this was the largest decline since 1991. The reduction in U.S. operations in the Middle East and the sequester mean this figure is likely to fall again in 2013.

When U.S. inflation-adjusted military spending fell by one-third in the 1990s, the U.S. share of global military spending only fell by six percentage points because other countries, particularly Russia, reduced their military spending as well. The 6 percent fall in U.S. military spending in 2012 resulted in a two percentage point fall in the global share, as military spending by the rest of the world remained essentially flat.

To see why U.S. military spending is likely to keep falling as a share of global military spending, even if the sequester does not go into effect, it helps to look at the drivers of this ratio. For any country, a change in military spending as a share of the global total can be attributed to two factors: changes in income and changes in the allocation of that income. A rising share of global military expenditure based on a rising share of global GDP (gross domestic product) is likely to be more sustainable over the long term than a rise based on a decision to spend more of GDP on defense at the expense of other priorities. The following charts distinguish between the impact of growth and the allocation of income on the U.S. share of global military spending.

From 1990 to 2000, U.S. growth roughly kept pace with global growth. So the impact of U.S. growth on the nation's share of global military spending offset the impact of rest-of-the-world growth . As a result, the net growth effect, shown by the blue line, was close to zero. Over the past ten years, faster foreign growth has reduced the U.S. share of global military spending.

The impact of growth on military budgets, shown above, has been disguised by shifting policy on how much of GDP to allocate to defense. In the 1990s, the United States cut the defense budget  whereas from 2000 to 2010, the defense budget increased. Between 1990 and 1995, cuts in foreign allocation of GDP to defense (especially in Russia) boosted the U.S. share of total military spending . Since 1995, the rest of the world has spent a fairly stable share of GDP on the military.

Combining the two previous charts, it is clear that changes in spending as a percentage of GDP have buoyed the U.S. share of world military spending, while changes in GDP have been a headwind. A decline in the U.S. share of world military spending seems likely in the absence of a new sense of insecurity.

The next chart consolidates the information from the previous three images. The black line shows the U.S. share of world military spending at five-year intervals, while the bars show what drove the change during each five-year period. The blue bars show how willing the nation has been since 2000 to spend a rising share of GDP on defense. Even if one assumes this commitment holds steady in the next five years, and if one uses International Monetary Fund (IMF) growth estimates, the U.S. share of military spending is set to decline as U.S. GDP growth  is lower than that of other military powers.

If the United States decided to spend a smaller share of GDP on the military,  would decline more sharply still. How likely is this?

Overall funding for overseas contingency operations has declined by just over 50 percent since 2008 as the war in Iraq has wound down. Funding for the two operations was as high as $187 billion in fiscal year 2008, which represents 30 percent of SIPRI's measure of U.S. military spending for that year. War funding is projected to come to $79 billion in fiscal year 2014, but it is likely to decline thereafter with the winding down of the war in Afghanistan.

As of fiscal year 2013, the number of troops deployed in Afghanistan and Iraq has declined 66 percent since fiscal year 2008. The Department of Defense projects troop levels will decline a further 40 percent in fiscal year 2014.

U.S. national defense spending has ranged widely, from less than 1 percent of GDP in 1929 up to 43 percent in 1944. These extremes illustrate that resource allocation to defense can increase rapidly when a war demands it.

Focusing just on the post-World War II period, U.S. national defense spending as a percent of GDP has ranged from a high of 15 percent in 1952 (during the Korean War) to a low of 3.7 percent in 2000 (the period of relative tranquility preceding the terrorist attacks of the following year).

In the post-Cold War world, the U.S. national defense budget has fluctuated within a relatively narrow band. It fell by about three percentage points of GDP as the nation reaped the peace dividend of the 1990s, then rose after the terrorist attacks of 2001. President Barack Obama's budget proposes cutting security spending to 2.4% of GDP in 2023. This would represent the lowest allocation of GDP to defense spending in the post-World War II era.

To put U.S. military spending in context, consider GDP and population shares relative to the rest of the world, as of 2012,the United States accounts for a larger share of global military spending than of either GDP or population, and would continue to even if military spending were to revert to 2000 levels as a percent of GDP.

As noted at the outset, military power depends on multiple factors, including the military budgets of a country's allies. To get a sense of this factor, the chart from page four was redone, with spending by NATO, Japan, South Korea, Israel, and Saudi Arabia added to the analysis. The United States and these allies account for a formidable 75 percent of global military spending in 2010. However, as the black line in the chart shows, the trend is less reassuring. The United States' and its allies' share of world military spending fell from 2005 to 2010. It is projected to fall further, to 60 percent by 2015, even if U.S. spending as a share of GDP holds up at today's levels. Budgetary pressures in Europe may mean this share falls even more rapidly.

Democracies are generally regarded as friendly to the United States, and this chart delivers a similar verdict to the last one. After the collapse of the Soviet Union, democracies accounted for the vast majority of the world's military spending. However, since the early 1990s, this share has declined slightly.

In 2012, U.S. military spending fell faster than overall military spending by democracies. However, the United States continues to account for almost half of all military spending by democracies. A decline in U.S. military spending is therefore likely to have a large impact on democracies' military spending as a share of the global total.

What would happen if the U.S. defense budget were cut? Differences in military spending among countries tend to have a big influence on equipment procurement and a far smaller one on personnel count.

This chart compares each country's share of spending and share of military equipment. The equipment measure includes twenty-one categories such as tanks, aircraft, and satellites. Spending and equipment levels are correlated. Russia is the exception, perhaps because it still has equipment left over from its period of high spending before 1990.

Unlike equipment, personnel is relatively uncorrelated to spending. Because of differences in labor costs, $1 million in the United States will hire fewer soldiers than $1 million in Russia or China. If military budgets were compared in a way that reflected varying personnel costs, U.S. military preeminence would appear smaller than it does using straightforward comparisons based on market exchange rates.

The effect of defense cuts on personnel would depend on which part of personnel spending decreases. Of the $195 billion in Department of Defense payroll outlays, only $84 billion went to active-duty military pay. Retired military pay, which does not directly increase defense capabilities, accounted for nearly 20 percent of total personnel expenditures in 2009.

The number of personnel employed by the Department of Defense has declined since the 1960s, while personnel costs have risen rapidly, in part due to rising U.S. health-care costs. The cost of military pay and allowances and military health care has risen almost 90 percent since FY 2001, while the active-duty personnel count has risen by less than 3 percent. Military health care costs have risen from $19 billion in FY 2001 to $49.4 billion in FY 2014.

As noted above, rising spending on defense personnel has not resulted in increasing troop strength. The following illustrate two additional reasons why spending may overstate the U.S. ability to project power.

The cost of military hardware has grown more than inflation. Today's spending results in less procurement than does spending in the past. Although the rising cost of hardware partly reflects rising quality, shipbuilders reported to the RAND Corporation that uncertainty surrounding the number of ships ultimately purchased increases labor costs and reduces the incentive to invest in processes that could reduce costs.

Countries such as the United States that have invested a substantial sum in their military must spend simply to maintain existing levels of equipment. The chart shows that the United States must spend about 1 percent of GDP on military hardware just to tread water. Spending in countries that have low military capital stocks will result in larger increases in defense stocks due to lower levels of depreciation.