<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD> <META content="text/html; charset=us-ascii" http-equiv=Content-Type> <META content="MSHTML 5.00.3017.1000" name=GENERATOR></HEAD> <BODY> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>All public sector output is valued at cost because</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>there is no market test for any of it that can be</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>measured with prices.  There are price deflators</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>for the inputs, but if you can use the same materials</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>to make a bomb that blows up 200 people instead of</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>one hundred, there is no measurement of this in</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>the spending numbers.   Hence a 'constant dollar'</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>measurement is inherently conservative in terms</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>of destructive power, which is advancing all the time.</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001></SPAN></FONT> </DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001>mbs</SPAN></FONT></DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001></SPAN></FONT> </DIV> <DIV><FONT color=#0000ff face=Arial><SPAN class=136230319-30112001></SPAN></FONT><FONT face=Tahoma size=2><BR> </DIV></FONT><FONT face=arial,helvetica><FONT color=#400040 size=2 style="BACKGROUND-COLOR: #80ffff">Accepting for the moment, the "success" of bombing, I have a question regarding economic accounting for military spending. IIRC, military spending is valued at input prices.  But if R&D makes bombs and other weapons "smarter" or more effectively destructive shouldn't the accounting of spending be adjusted accordingly.<BR><BR>Is it possible that "real effective destructive index" of military spending (and stocks) would show different levels and trends?<BR><BR>Of course, a real security product would be increased by destroying many weapons.<BR><BR>Stuart Elliott</FONT> </FONT></BODY></HTML>