I think that military size is a classic example of this. If you have a military that is overwhelmingly stronger than everyone else's (and you only plan to fight defensive wars) you probably ever won't need to use it. Once you have the biggest army, why would anyone want to fight you? Other countries know they'll lose.
And here's where the off-equilibrium part comes in. You never expect to see the scenario where the huge army is actually useful. But if you took away the big army, suddenly you would need it, because other countries might be tempted to invade. In other words, you can't look at the fact that your army is not being used to fight wars and infer from that the large army wasn't necessary. The benefits, in other words, never get observed, because they are off the equilibrium path.
I think that one of the big benefits of widespread gun ownership operates in the same way. Widespread gun ownership has lots of costs - more crimes of passion, more accidental shootings, etc. But like a large army, having lots of hunters (and even just armed gangbangers) has off-equilibrium national security benefits. Last year, Marginal Revolution linked to the following post at Federalist Paupers on this subject:
The state of Wisconsin has gone an entire deer hunting season without someone getting killed. That’s great. There were over 600,000 hunters.
Allow me to restate that number. Over the last two months, the eighth largest army in the world – more men under arms than Iran; more than France and Germany combined – deployed to the woods of a single American state to help keep the deer menace at bay.
But that pales in comparison to the 750,000 who are in the woods of Pennsylvania this week. Michigan’s 700,000 hunters have now returned home. Toss in a quarter million hunters in West Virginia, and it is literally the case that the hunters of those four states alone would comprise the largest army in the world.
This kind of level of armed citizenry would make it incredibly difficult to successfully invade the US. Even after you beat the main professional army, everywhere your soldiers go they risk getting killed by trained riflemen. That's going to make it very hard to subdue the populace.
The interesting thing, at least politically, is that when benefits get sufficiently far away from the equilibrium path, people tend to forget that they're there. It is almost unthinkable that someone would try to mount a land invasion of the US any time in the near future. And at least part of this is due to the deterrent effects of domestically owned guns. But the prospect of hunters shooting at - who? the Russians? the Chinese? - seems so far-fetched that people discount it. The relevant question is to assume that we're no longer in equilibrium. If the Chinese had invaded, would America's hunters shoot at them? Very likely. And as long as that's the case, it's a real benefit. Even though it's incredibly unlikely you'll ever see it come to that.
It may still not be worth it to have lots of guns. It may be the case that, hunters and gangbangers or not, the conventional US Army is enough to make invasion very unlikely. But that's not really the point - a benefit is a benefit, even if it might be very costly to obtain.
As Cypress Hill noted about guns: When the $#*t goes down, you'd better be ready.
The game theorists riposte would be as follows: If you're always ready, the $#*t may never actually go down. But that doesn't mean you don't need to be ready anyway.
