Guns versus butter model

"Guns and Butter" redirects here. For the song, see Guns and Butter (song). For the videogame, see The Global Dilemma: Guns or Butter.
The production possibilities frontier (PPF) for guns versus butter. Points like X that are outside the PPF are impossible to achieve. Points such as B, C, and D illustrate the trade-off between guns and butter: at these levels of production, producing more of one requires producing less of the other. Points located along the PPF curve represent sustainable combinations of each type of production in a world where scarcity is a binding constrain. A, however, is inside of the PPF and represents a combination of output that is not utilizing all available resources.

In macroeconomics, the guns versus butter model is an example of a simple production–possibility frontier. It demonstrates the relationship between a nation's investment in defense and civilian goods. The "guns or butter" model is used generally as a simplification of national spending as a part of GDP. This may be seen as an analogy for choices between defense and civilian spending in more complex economies. The nation will have to decide which balance of guns versus butter best fulfills its needs, with its choice being partly influenced by the military spending and military stance of potential opponents.

Researchers in political economy have viewed the trade-off between military and consumer spending as a useful predictor of election success.[1]

In this example, a nation has to choose between two options when spending its finite resources. It may buy either guns (invest in defense/military) or butter (invest in production of goods), or a combination of both.

  1. ^ Hibbs, Douglas (2010). "The 2010 Midterm Election for the US House of Representatives". CEFOS Working Paper. 9. CiteSeerX 10.1.1.409.410. doi:10.2139/ssrn.1691690. S2CID 154472996. SSRN 1691690.