The objective in this paper is to discuss NATO's mission, its current Article V and non-Article V threats, and identify certain factors that contribute to Alliance effectiveness. It is argued that the Alliance's mission is to protect the interdependent economies of West/Central Europe and North America from internal, peripheral, and external peace disturbing crises. Analysis leads to the conclusion that NATO effectiveness will vary with its size, and ability to minimize problems associated with adverse selection, moral hazard and free riding.