Economic Analysis of Investment in Nuclear Weapons

Nuclear weapons are a rather marginal issue in economics as opposed to the political realm where it is an ever-present topic concerning global security. This thesis argues that economics can make a valuable contribution to the nuclear weapons debate in several ways and aims to present those in a comprehensive manner. First, a cost-benefit approach is employed to show that costs and benefits go beyond counting dollars directly spent on nuclear arsenals. Second, market investment in nuclear weapons producers is analysed with the help of SWOT analysis. It has been shown that the profitability of such an investment is closely tight to government decisions and ethical concerns must be taken into account as well. Finally, game theory, namely the ideas of Nobelist Thomas Schelling (1960), is being used to examine behaviour of states, the main actors connected to nuclear weapons. If the theory is true, nuclear weapons will serve as a deterrent and an equilibrium, or focal point, of non-use will prevail. Nevertheless, some assumptions and conditions are not being met in reality and the possibility of a non-equilibrium outcome, the use of a nuclear weapon either by accident or intent, remains.