Less Invasions, More Equations! The Trade-Off Between Present and Future Security

Standard models of the security dilemma often assume that a state cannot invest in its economy to allow for more military spending in the future. In contrast, this paper develops a model where a state faces a trade-off between present and future security - excess military spending today comes at a cost of economic development and, therefore, future military spending. We show what strategy a security-maximizing state will pursue under these conditions and how the addition of a second state affects the equilibrium. We explain how the price theoretic concepts of income and substitution effects can be used to analyze similar problems.