Quotulatiousness

April 16, 2012

A more sensible way to analyze the F-35 issue

Filed under: Cancon, Economics, Military — Tags: , , , — Nicholas @ 09:15

In the National Post, Shaun Francis and John Kelleher offer an easier-to-understand method of analyzing the costs and benefits of the F-35 program:

Consider a car. Let’s say you’re considering buying a subcompact or an SUV, which you plan to hold onto for five years. A subcompact has a one-time purchase cost of $20,000 followed by $7,000 in annual, recurring costs on things like gas and maintenance. Your total costs over five years are therefore $55,000, or $11,000 average cost/year.

Meanwhile, the SUV has a one-time purchase cost of $25,000 and recurring costs of $7,500, leading to a five-year total cost of $62,500, or $12,500 average total cost/year.

To examine whether buying an SUV makes sense, you take the costs of the SUV and you subtract the costs of your next best alternative, the subcompact. Then you ask yourself, is it worth a premium of $1,500 per year to drive an SUV versus a subcompact?

From a decision point of view, it doesn’t make sense to get upset over the $62,500 total cost of the SUV. That’s not the pertinent figure here. You can’t walk to work. You need a car. So the pertinent question is the cost differential — in this example the $7,500 premium between your preferred choice and the next best option.

Canada’s F-35 decision should have been framed in a similar fashion by the Auditor General. The appropriate question? Do we want to pay a premium for the world’s best fighter jet, which will be cutting edge for decades to come, or can we make do with more reasonably priced planes that are bound to become obsolete sooner?

In the article they say “no one is questioning whether Canada needs fighter jets”, which is not actually true. Significant portions of the NDP, the Greens, and even some Liberals feel we should not be buying any military equipment that does not have a primarily humanitarian use. In their view, transport aircraft might be acceptable but combat aircraft would not. Trucks, yes, but tanks, no.

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