At various times, the United States has undergone the painful process of reducing military spending. Military bases from the Carolinas to California pleaded to be spared, citing huge job losses if they close. How can one rationally decide which bases to shut down, given the necessity of jobs?

One must examine the opportunity cost of continuing to operate each base. As an example, the money used to operate the San Diego Naval Station might have a next best alternative use in improving California's state universities, which would add to productivity and so enhance growth. While closing the base would sacrifice military jobs, the opportunity cost would depend on the next best alternative employment for these workers. In the future, new jobs would be created for those trained. One would carry out the same exercise for each military installation and ax those with the highest opportunity cost. An example might be a New England base using antiquated defense equipment that provides little defense per dollar spent.