UC Irvine

This paper analyzes a guns-versus-butter model in which two agents compete for control over an insecure portion of their combined output. They can resolve this dispute either peacefully through settlement or by military force through open conflict (war). Both types of conflict resolution depend on the agents’ arming choices, but only war is destructive. We find that, insofar as entering into binding contracts on arms is not possible and agents must arm even under settlement to secure a bigger share of the contested output, the absence of long-term commitments need not be essential in understanding the outbreak of destructive war. Instead, the ability to make short-term commitments could induce war. More generally, our analysis highlights how the pattern of war’s destructive effects, the degree of output insecurity and the initial distribution of resources matter for arming decisions and the choice between peace and war. We also explore the implications of transfers for peace.