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Militarization and Capital Accumulation: A Mean Field Game under Security Congestion

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  • Wei Liang

    (China Economics and Management Academy, Central University of Finance and Economics, Beijing, 100081, China)

  • Heng-fu Zou

    (The World Bank, Washington, D. C., 20433, USA)

Abstract

This paper develops a dynamic mean field game model of capital accumulation and militarization among symmetric countries facing stochastic shocks. Each country optimizes consumption, productive investment, and military spending while responding to the average militarization level of others. We derive the coupled Hamilton-Jacobi-Bellman and Fokker-Planck equations governing equilibrium, and prove existence and unique ness under strategic externalities. A linear-quadratic-Gaussian version yields closed-form feedback rules and forward dynamics. Simulations reveal that low internalization of global militarization leads to arms traps and stagnation, while stronger externality awareness supports growth and restraint. The model offers a rigorous framework to study decentralized militarization externalities (a tragedy of the commons) and their macroe conomic consequences without assuming hierarchy or conflict.

Suggested Citation

  • Wei Liang & Heng-fu Zou, 2026. "Militarization and Capital Accumulation: A Mean Field Game under Security Congestion," CEMA Working Papers 807, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:807
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