The elusive, exclusive, and rarified 2% threshold

Source: Notes On Liberty
by Brandon Christensen

“I’m talking about the 2% threshold that NATO members are supposed to meet when it comes to military spending and their domestic budgets. Most members rarely meet it. The ones on Russia’s border meet it, but the ones in between the comfy confines of former Warsaw Pact client-states and the Atlantic Ocean rarely, if ever, deign to meet it. Mancur Olson and Richard Zeckhauser explained why this happens way back in 1966, with their article ‘An Economic Theory of Alliances.’ The gist of the article states that incentives are to blame for the chronic lack of agreed-upon contributions from member states. To counter this lack of incentives, Olson & Zeckhauser put forth two options: a marginal costs sharing scheme whereby each member state contributes an agreed-upon percentage, or substituting a union for an alliance.” (03/15/23)