The present value criterion in military investments

Since the benefits of a military investment are not marketable, the investment itself is also not marketable. It follows, in particular, that there is no way in which the cost profile of such an investment can even conceptually be varied, except by government borrowing or by adoption of an alternative investment. Hence, in the absence of borrowing, a cost stream represents a unique profile of resource withdrawal from the private sector of the economy. Therefore, the present value of such a cost stream cannot be a proxy for the stream itself in comparisons with other cost streams. Government can resort to public borrowing to change the profile of taxes necessary to pay for the investment, and thus, to some extent, change the profile of real resource withdrawal from the private sector, If the borrowing and taxing operations could result in predictable real resource withdrawals, then a present value criterion, using the borrowing rate as the discount rate, could be formulated: Of two cost streams, the one with the lesser present value would permit resource withdrawals that dominate those that the other would permit. Unfortunately, the state of the art has not advanced to the stage where such predictions could be made with any degree of confidence.