Reexamination of the Relative Efficiency of the Draft and the All-Volunteer Army

Abstract

Economists are in almost universal agreement that the all-volunteer approach to recruiting military personnel is more efficient than the draft.' Several related considerations form the basis for this agreement. First, the draft imposes a discriminatory tax on recruits equal to the difference between their market wages and the below-market military wage (plus a compensating differential for serving in the military). Second, below-market pricing of personnel under the draft leads to a military with too many recruits. Third, the all-volunteer approach attracts those recruits with the lowest opportunity costs and hence secures a given number of recruits at less cost. These standard economic arguments for the all-volunteer approach over the draft have been heavily influenced by Hansen and Weisbrod [7] and Oi [10]. The purpose of this paper is to argue that under certain conditions the above considerations fail to make a compelling case for the all-volunteer approach over the draft. The conventional economic case for the all-volunteer approach fails to recognize that the relative difference between the cost of the all-volunteer approach and the draft depends on the percentage of the eligible population recruited into the military and the dead-weight loss associated with conventional taxation. As the number of recruits increases relative to the eligible population, the advantage of being able to discriminate between high and low opportunity cost recruits diminishes. Also, the larger