A Capital Theory and Capital Structure of War
Youliy Ninov
What the paper says
The article applies an alternative, Austrian economics capital theory to the dynamics of the 'war economy'. It is based on a graphical analysis of a novel capital structure, contrasting with traditional Hayekian representations. We explicitly model the diversion of productive capital into unproductive war goods and describe the particular effect of the financing mechanisms, such as debt monetization, which alter the market signals. The analysis reveals a distinct shift in capital allocation, resulting in a one-off decline in productive capacity and a lower long-term growth trajectory, yet exhibiting greater short-term stability due to state-controlled resource allocation and debt financing. It shows how profit and interest rates move in tandem, a divergence from the standard business cycle phenomena. Finally, the analysis is extended to a proposed case of free market national defense, which treats national defense as an entirely private good, with the consequence that freedom becomes a positive externality.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.