Alliances and Collective Goods

How are burdens shared within an alliance? How many and what kinds of armed forces are alliance members likely to purchase in support of their collective interest in deterrence and defense? These questions are the province of the economic theory of alliances, which has been widely accepted as offering an explanation for two tendencies often found within alliances: disproportionality in burden sharing and suboptimality in the amount of military spending. Proponents of the theory have marshalled an impressive body of evidence in support of propositions derived from it, but efforts to test the predictive power of the theory have relied exclusively on data derived from alliances after World War II. An examination of burden-sharing arrangements within seven pre-1945 alliances produces outcomes that cannot be adequately explained by the theory as it now stands. Consideration of the pre-1945 cases thus suggests additional refinements to the theory, the most important of which have to do with the degree of substitutability of the armed forces of alliance members and the difference between deterrent and defensive alliances.