Guns versus butter model

In economics, the guns versus butter model is an example of the production possibility frontier. It models the relationship between a nation's investment in defense and civilian goods. In this model, a nation has to choose between two options when spending its finite resources. It can buy either guns or butter, or a combination of both. This can be seen as an analogy for choices between defense and civilian spending in more complex economies.

The nation will have to decide which level of guns and butter best fulfill its needs, with its choice being partly influenced by the military spending and military stance of potential opponents.

The peace dividend is the amount of civilian goods produced by a decrease in defense spending.

See also

• arms race

External links

• Guns vs. butter model (Adobe .pdf format)