Introduction to the National Defense

A public good is a product or service which benefits everyone in the community.

Typically, these services are administered by governments and paid for collectively
through taxation. One of the best examples of a public good is National Defense.
Military units as a component of the Malaysian Armed Forces are responsible for
providing the society with a public good, which is national defense. This service is
provided for free through public taxation which administered by the government to
defend the country's sovereignty and protect everyone from any and all types of
threats. Malaysian Armed Forces are divided into three services like Malaysian Army,
Malaysian Navy and Royal Malaysian Air Force. It has an approximate active
strength of around 110,000 personnel with around 310,000 in the reserves. In 2021,
Malaysia is ranked 44th out of 139 countries in terms of military strength according to
a report published by Global Firepower (GFP). Throughout the world, with few
exceptions, armies represent professional, highly structured, hierarchal organizations
characterized by high levels of discipline and motivation. When it comes to safety, the
safety culture of an organization will heavily influence the level of risk willing to be
accepted, the openness of communication and trust. Malaysia Government devotes a
fraction of income for military spending, with the aim of providing a sufficient level
of national security. Malaysian Government has increased the annual budget
allocation for national defense for year 2021 to RM15.86 billion. This clearly
demonstrates the government’s deep commitment to national defense priorities.
Throughout this process, all available resources at a given time are committed to
ensuring the preservation of sovereignty, independence, unity, territorial integrity,
constitutional democracy, and national interests under the conditions of facing any

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kind of aggression, danger, threat, risk or challenge. Once the government spends
billions of dollars on the national defense, everybody who lives in the country enjoys
same level of protection and security. It is provided in the same amount to all
consumers, no matter if they desire more or less than the current level and no matter
how much they value it.

Explanation on the Economic Problems Faced by Public Goods in the Market

The free rider issue is the one of the most serious economic issues today. Free riding
occurs when individuals or organizations enjoy the benefits of a good without
contributing to its provision (Stiglitz, 1986). In the case of a public good where the
provider cannot exclude, a good which other provide for themselves will also be
provided to the free rider. Free Rider is a form of problem, in which market-like
behavior of individual gain-seeking does not produce economically efficient results.
Goods that are subject to free riding are usually characterized by the inability to
exclude non-payers. If too many consumers decide to free-ride, a system or service
will eventually not have enough resources to operate. This will lead to under-
provision of a good or service and thus causes market failures (Ray Powell, 2008).
One of the best examples of a public good is national defense. In order to have such a
public good, everyone pays taxes which are then used by the government to finance
the military. However, there are undoubtedly people who have not paid their taxes.
These people, without having paid their share of the cost of having a military, still
benefit from the protection the military provides. They are free-riders. Suppose that
there are 100 million people in a country but only a few citizens contributing by
paying taxes. That, in turn, would reduce the funding and quality of the public goods
provided, to the detriment of all residents, including those who do contribute for the
goods. However, not all taxpayers pay the taxes they should and non-compliance can
take the form of underpayment of taxes due under-reporting of income or not
reporting it at all. With these conceptual and statistical problems, the revenue of the
country will eventually decline and caused deficit which lead to an economic
problem.

Besides that, negative externality is another problem in the market. A negative

externality is a negative consequence of an economic activity experienced by an
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unrelated third party (Mankiw, 2020). The spread of COVID-19 is a great example of
a negative externality, where the actions of bystanders affect another people’s
wellbeing. When first news broke in late 2019 that a new and dangerous coronavirus
had appeared in China, it seemed of little concern by all the countries. Eventually, the
virus spreads to other countries. Investigations began and traced the outbreak to a
seafood market were live bats were sold and believed to be the origin of the virus.
Those infected with this virus can spread the disease to others, who can, in turn,
spread it further and so on. The closeness of the people while interacting with other
people in the public utilities also has appeared to cause negative impact to people. In
order to minimize the spread of the virus, the government has implemented a
widespread restriction on social contact and suspended business operations to stop the
spread of the virus. These inadvertently affect the financial markets and the global
economy. As a consequence, society bears the cost of a negative externality in terms
of socio-economic inequality, poverty, and unemployment (Datta-Chaudhuri 1990).
The sharp economic downturn in the region, has in turn, resulted in shrinking defense
budgets and declining arms imports. Despite playing an essential role in the
immediate response to the crisis, as well as maintaining international cooperation and
resilience at home, the defense industry could experience significant cutbacks as a
result of the pandemic due to shrinking GDPs and mounting economic damage.
Military activity can also lead to negative externality. Besides that, the weapons and
military material used during conflicts in order to protect resources can significant
impacts on the environment and other wellbeing. If army or terrorist used chemical
substances and nuclear warfare to protect or extract resources during the war leave
environmental legacies. These produce extensive amounts of greenhouse gases that
contribute to climate change, pollution, and cause resource depletion. Land mines are
another example. They are devastating long after a conflict, killing and maiming
civilians such as farmer. They are costly to clear and land which has not been cleared
of mines which may not be used for farming for a long time.

Information asymmetric is another problem in the market. It affects the quality of

innovative goods and services available on the market and disturbs the process of
allocating resources efficiently. Usually, these asymmetries arise either as a
consequence of confidentiality on useful insights or from the deliberate action of
sharing misleading or insufficient amount of information. In the defense sector, a
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particularly common issue giving rise to information asymmetric are intellectual
property or commercial confidentiality related concerns or security considerations.
Misunderstanding asymmetry poses significant dangers, misuse of the terms
asymmetry and asymmetric distorts those vital processes and leads us to make major
strategic blunders. For example, by focusing on threats rather than enemy strategies,
we fail to understand their strategic nature, goals, and overall concepts of operations.
Information asymmetry thus result in situations where certain parties have more
information regarding an issue than another. As a result, is considered one of the
major causes of market failure

Explanation of How Public Goods Fit its Characteristics

Public goods consist two characteristic which are non-excludable and non-rivalries.
National defence is a service which satisfies the both characteristics of a public good.
Non-excludability means that once the product is produced, it is impossible to prevent
people from consuming it. National defence is non-excludable because it provides
protection not only to the citizens who may have contributed to pay for it, but all
others who may have not contributed to cover its costs but who live under the
protection of defence shield. Even if a person does not pay any taxes to the
government, the person can still be protected by the national defense. For example, if
a missile were heading for the country, the military would shoot it down to save
everyone in its path, regardless of who did and didn’t pay their taxes. Once defence is
provided, it is not possible to exclude people who have not paid for it from its
consumption. Further, the cost of an additional user is zero as it does not cost any
more if there is one more person to be protected.

No rivalry means that many people can consume the produced product without
diminishing its usefulness to others (Cornes & Sandler, 1986). National defence is
non-rival because one person’s use of it does not hinder anyone else’s consumption.
For example, as the population grows, more people benefit from national security, but
the level of protection for those already benefiting remains the same. Further, it is
obvious that one per offs consumption does not affect either the quantity of air or the
quantity of national defence available for another to consume.

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Besides that, public goods are also characterised as non-rejectable. Non-rejectable
means that the consumption of the good or service cannot be dismissed or unaccepted
by the public as it is available collectively to all the people. For example, national
defense service is a public good which financed by all of the public taxpayers. An
individual cannot reject being defended by the army forces of a country as it is
provided by the government by using the collective fund for all the residents.

In addition, public goods are indivisible. Private goods can be divided into desired
units to meet individual needs. People can buy their desired number of textbooks each
time or buy a certain number of the financial securities such as stocks or bonds, but a
public good is indivisible. In other words, the public good is designed as a whole for
all potential people’s consumptions. National defense is for protection of all people of
the nation, not for certain individuals.

Suggestions to Overcome the Economic Problem of the National Defense

There are many steps to overcome the economic problem of the national defense. The
best way to pay for public goods is to find a way of ensuring that everyone will make
a contribution, thus preventing free riders. For example, if people come together
through the political process and agree to pay taxes and make group decisions about
the quantity of public goods, they can defeat the free rider problem by requiring
through the law that everyone contribute. Besides that, government can ensure the
provision of public goods by forcing people to pay through their taxes. Since there are
many citizens share their wealthiness in social media, government authority can also
follow the current trend to caught those people and impose heavy fines or penalty to
free riders. In addition, the threat of fines or jail time are enough of a threat that most
people find it more appealing to pay their share of public goods via taxes than to free-
ride.

Government plays an important role in controlling the negative externalities. For

instance, the disease of COVID-19 may not be spread and adversely affect other
countries if immediate directive is given by the country where the disease originates
or other countries. The Malaysian government has delayed to immediately enforce an
order by banning entry from severely infected countries. If this has been enforced

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earlier, Malaysia may not have health and the economic problems as it does now. In
case that the situation is successfully controlled earlier, Malaysia Government is
likely to have sufficient funds and may use its budget as planned for the improvement
of national defense service in a country. The government should use various forms of
regulation to reduce the harmful effects in a country. In order to control the behavior
of the citizens, the government should impose severe punishments or imprison those
who do not comply with government directives who cause harmful effects to the
environment or economic of a country. An effective tax will equal the cost of the
externality, and it is imposed with the goal of discouraging activities that cause such
harmful effects. The laws will also act as preventive measures since individuals may
be discouraged from negative externalities for fear of being fine or imprisonment.

In addition, information asymmetric can be overcome by disclose on the specific

information about the industry in order for the public to better assess the risks
associated with the industry. Government should also enact a law by enforce heavy
penalties for those spread or sharing false information. This can prevent information
asymmetric in an industry.

CONCLUSION

Of all the function of the State, the one generally considered essential above all others
is national defense. According to the popular ideal, national defense is a service
provided by the nation to its citizens. It is entirely influenced and supplied by
government. The role of the government in maintaining a secure economy to the
public is very important. Hence, the taxation is necessary to fuel military and another
public goods expansion. However, there are some economic problems to national
defense, government or the relevant party can still overcome those problems with the
proper action plans. The central planning and bureaucratic is necessary to produce
public goods and to do a better job of providing them.

2508 WORDS

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 ATTACHMENT

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