The aim of this research project is to open and explain questions related to assessment of the cost of national defense. This project studies earlier economic research on national defense assessment and with the help of simplified example calculation visualizes mechanism of action that affect costs of national defense based on earlier literature. Alternative assumptions are used to bracket the opportunity cost of conscription. In addition, it is estimated, how conscription is affecting Finnish GDP and what is the share of national defense costs in Finland’s GDP.
The costs of national defense can be estimated in different ways. In its simplest form, expenditure on national defense can be calculated from the state budget. These expenditures are formed basically from payroll costs for key personnel and material purchases. In wider review opportunity costs which do not directly appear in the state budget are observed. The most important such single opportunity cost relates to military service and time spent by conscripts in the military for which they are not compensated, except for a small daily allowance.