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    [–] IS study: Measuring power in net terms rather than gross terms is smarter. "Gross indicators systematically overstate the power of populous countries, because they count the benefits of having a big population, but not the costs." smurfyjenkins 2 points ago in IRstudies

    A big population is obviously an important power asset.38 Luxembourg, for example, will never be a great power, because its workforce is a blip in world markets and its army is smaller than Cleveland's police department. A big population, however, is no guarantee of great power status, because people both produce and consume resources; 1 billion peasants will produce immense output, but they also will consume most of that output on the spot, leaving few resources left over to buy global influence or build a powerful military.

    To rank among the most powerful nations in the world, a state needs to amass a large stock of resources, and to do that a state must be big and efficient. It must produce high output at low costs. It must not only mobilize vast inputs, but also produce significant output per unit of input. In short, a nation's power stems not from its gross resources, but from its net resources—the resources left over after subtracting costs.39

    What costs? There are three main costs that erode countries’ power resources: production costs, welfare costs, and security costs.

    Production costs are the price of doing business; they are the resources a nation must input to generate economic and military outputs. In economics, production costs include the raw materials consumed, and the negative externalities (e.g., pollution) created, during the production process. In military affairs, production costs refer to the number of assets needed to generate a given level of force and are mainly a function of skill and technology—a military with skillful military personnel and superior technology will use fewer resources to accomplish a mission than a military with low skill and outdated technology.40

    Welfare costs are subsistence costs; they are the expenses a nation pays to keep its people from dying in the streets and include outlays on basic items such as food, health care, social security, and education.

    Security costs are the price a government pays to police and protect its citizens. The logic of deducting assets tied up in domestic law enforcement and homeland security is simple: police and military units that are bogged down chasing criminals, quelling rebellions, or defending borders against foreign invasions cannot project power abroad or create wealth at home. Measuring security costs thus accounts for the fact that two nations with identical sets of gross resources may, nevertheless, wield vastly different levels of power if one country is surrounded by enemies and wracked by internal strife whereas the other is stable and surrounded by allies.