We analyse arms races for an environment in which social, human and intellectual capital are more important than physical capital. The Richardson model can be used to analyse the Anglo–German naval race before the First World War and the US–Soviet missile race during the Cold War; in both cases the economic constraint associated with acquiring weapons was the binding constraint. Previously, human and social capital were more important components of military power. Modern technology has reduced the importance of the economic constraints associated with acquiring physical capital. Our model of such a process suggests that a stable equilibrium is unlikely.
KeywordsArms races Arms trade Cold War Human capital Increasing returns to scale Lotteries Public goods Returns to scale Richardson model of arms races Risk Slavery Social capital Technical change Terrorism Uncertainty
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