This essay employs public choice theory to explain the drivers of rising defense costs. Key sets of actors, including politicians, bureaucrats, and defense contractors, have incentives to capture private benefits associated with defense spending. But there are weak incentives to cut costs such that the individuals seeking to maintain spending in areas that do not contribute to defense win out, contributing to the observed rising costs.

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Chandler S. Reilly is an assistant professor of economics at the Metropolitan State University of Denver.
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