I
Amplified externality
Harm is not only a byproduct of output. Where a more destructive product commands a higher price, marginal profit rises with harm. A linear charge then drives the firm to a corner. The burden has to steepen as the harm does.
Peace Economy Institute · MMXXVI
War is an unpriced externality.
We price it.
The Peace Dividend Mandate requires every dollar a defense contractor spends on weapons to be matched by certified peace infrastructure, on a ratio that rises with conflict and falls when conflict falls.
The record
- $2.887 trillion
- Global military expenditure, 2025
- Highest on record outside a world war. Eleventh consecutive annual rise.
- $21.8 trillion
- Economic impact of violence, 2025
- 10.5% of global GDP in purchasing-power terms. Institute for Economics and Peace.
- 5:1 to 7:1
- Downstream cost to military spending
- The working paper’s documented range. The 5:1 active-conflict tier takes the lower bound.
- 0.5%
- Of military spending that reaches peacebuilding
- 2026 Global Peace Index. Current peace investment is about $10–15 billion a year.
Sources: SIPRI, military expenditure 2025; Institute for Economics and Peace, economic impact of violence 2025; 2026 Global Peace Index, peacebuilding as a share of military spending. The 5:1 to 7:1 range is the working paper’s, net of the military and security spending that the violence estimate itself includes.
The exemption
The only major industry that does not pay for its harm.
When a contractor delivers a weapons system, the procuring government pays, the firm books the margin, and the transaction is finished. None of what follows is on a balance sheet the producer is required to keep: the dead, the destroyed city, the displaced, the decade in which a region does not develop.
Greenwald and Stiglitz (1986) showed why a correction is required. Where information is imperfect or risk markets are incomplete, externalities are pervasive, and the market outcome is not constrained Pareto efficient. The method is to change the price the producer faces. Carbon, toxic waste, and systemic financial risk have each been brought under that method. Weapons manufacture has not.
The exemption is a political outcome. Industries with concentrated power write the rules that govern them. Any correction that ignores that fact will be captured. The Mandate is built so that capture is the more expensive strategy.
The schedule
The ratio rises with the harm.
Classification is algorithmic, drawn from Uppsala conflict data, the Global Peace Index, and UNHCR. A flat tax can be lobbied down to a number. A schedule tied to a public index moves when the world moves.
- 5:1Active major conflicts
- 3:1Elevated regional tensions
- 2:1Relative stability
- 1:1Sustained peace benchmarks
- 0.5:1Verified long-term peace
Work the ratio
An obligation, not a slogan.
Choose a conflict tier and a contractor’s weapons spend. The figure that follows is the arithmetic of the published schedule. It is not a forecast, and it is not five times a national defense budget. The Mandate attaches to research, development, production, and marketing of weapons.
The conservative end of the documented external-cost range, five to seven to one.
Required peace infrastructure
$5,000,000,000
At 5:1, each dollar of this weapons spend carries five dollars of certified peace infrastructure.
Three claims, offered for refutation
What has to be true for a correction to survive its own politics.
II
Lobby inversion
Inversion holds when the marginal burden avoided by reducing conflict exceeds the marginal gain from sustaining it. Under that condition the lobby is financially better used for peace. A flat rate loses the inequality precisely when conflict is highest.
III
Nested information failure
Contractors know what governments cannot verify. Governments know what citizens cannot verify. A reform at only one layer leaves the other able to carry the externality. Pass-through into the public budget is how a firm-level burden reaches both.
Appendix A: the formal model, with the propositions and their scope conditions
Scale
From $10–15 billion a year to between $1.4 and $3.5 trillion.
That is the working paper’s estimate of mandated peace infrastructure at full implementation, against current global spending on conflict prevention, peacebuilding, and reconciliation combined. The multiple is on the order of one hundred to three hundred. The money is the obligation of the industry whose products are the subject of the mechanism.
Institutional foundation
Credibility before obligation. Design the Certification Authority, publish the conflict-level method, run a small voluntary pilot, and commission independent modeling of who would receive the investment.
Legislative anchoring
Make compliance a condition of access to willing defense markets, beginning with the European Union and like-minded states. A large market can set a standard without a veto at the Security Council.
Scale
Once peace investment is a sector, contractors who have learned it hold an advantage, and the same profit motive that built the war economy has a reason to prefer a lower ratio.
The library
Open for comment.
- The Peace Dividend MandateA structural framework for incentivizing world peace through market mechanisms and conflict externality pricing
- A Formal Model of Externality Correction under Producer LobbyingThe structural core of the Peace Dividend Mandate
- The Peace Dividend MandateA structural framework for pricing conflict externalities
The war economy has to pay for what it costs.
The Mandate does not require a change in human nature, an improvement in corporate culture, or political will that arrives before the incentive. The Institute’s founding year is the work of making the argument impossible to ignore.
Fund the founding work