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This paper was published in 1986 in Essays in Honor of K.J. Arrow, edited by Walter P. Heller and Ross Starr.

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ABSTRACT:
This paper shows that if workers have identical wealths, abilities, and preferences then a draft lottery is Pareto superior to a voluntary army. It also shows that if being a civilian is a "normal good", then the optimal pay schedule will be such that people prefer not being chosen for the army. The paper shows how this idea extends to occupational choice in general and shows that pure gambles taken prior to occupational choice can substitute for lotteries that determine one's occupation. This paper repairs what I think is a major flaw in standard general equilibrium theory, which assumes away the nonconvexity of preferences that follows from the discreteness of occupational choice.

SUGGESTED CITATION:
Ted Bergstrom, "Soldiers of Fortune" (July 1, 1986). Department of Economics, UCSB. Ted Bergstrom. Paper 1986A.
http://repositories.cdlib.org/ucsbecon/bergstrom/1986A