Why conscription means higher taxes

Thanks in large part to the work of free market economists Milton Friedman and Alan Greenspan working for Richard Nixon, in 1973 the United States abolished the draft and switched to an all-volunteer army. The pro-draft Generals debating against Friedman argued that paying patriotic volunteers would be substantially more costly than conscription.

Friedman, of course was able to point out the gap in their logic.

The argument that a volunteer army would cost more simply involves a confusion of apparent with real cost. By this argument, the construction of the Great Pyramid with slave labor was a cheap project. The real cost of conscripting a soldier who would not voluntarily serve on present terms is not his pay and the cost of his keep: it is the amount for which he would be willing to serve. He is paying the difference. This is the extra cost to him and must be added to the cost borne by the rest of us.

Yet sadly many otherwise liberal nations (Norway, Denmark, Finland and Switzerland) remain unpersuaded and continue to compel young men to serve.

A new paper in the journal Public Choice might hopefully persuade them otherwise. It shows that even if you ignore Friedman's point about the cost to the draftee, compulsion is still the wasteful option. Authors Javier Birchenall and Thomas Koch find:

that voluntary enlistments leave more high-income earners in the civilian sector, leading to a larger tax base. When income taxes are set optimally, voluntary enlistments lead to less distortionary taxation than a draft. 

Even though you can pay conscripts substantially less than volunteers, conscription still means higher taxes. This is because voluntary armies tend not to draw in those who have high-paying productive work available. Under conscription, these people will no longer be in the civilian sector paying the taxes that fund the military. That means that shortfall will be made up with higher taxes across the board for civilians.