Originally created 11/05/01

Brauer: Economics of terrorism deserves consideration

The Sept. 11 terror attacks have given rise to a vast amount of commentary. But one group of experts has not been asked its views: economists.


What could economists possibly have to say about terrorism, other than that the attacks on the United States might have caused a recession, something that is taken to be "common knowledge" anyway?

The answer is that there is a field within economics - the economics of terrorism - that raises important issues and has made important discoveries that people and politicians should be aware of. Let me make three points.

First, economists see terrorists as rational actors - of a shabby sort, to be sure, but rational nonetheless. Even terrorists need to decide how to apply limited resources to maximize their impact.

One empirically testable hypothesis is that when governments constrain one avenue of terror, terrorists will substitute and pursue another. The installation of airport metal detectors from 1973 onward induced terrorists to increase attacks on other targets, such as embassies. And as embassies were secured from 1976 onward, terrorists shifted to attacking diplomatic personnel away from secured embassy grounds.

The Sept. 11 attacks confirm this hypothesis of substitution. Airport security in this country was lax relative to other targets, attracting just this sort of action.

Second, another testable hypothesis is that there will be cycles of terrorism. A terrorist attack, or series of attacks, induces a government reaction during which opportunities for terrorism decline as terrorists search for substitute targets.

Meanwhile, the government declares victory and attention fails, eventually permitting the renewal of the cycle.

In the wake of the Sept. 11 attacks, we can predict a decline in the number of transnational terror attacks for the next few years.

But eventually the number of terror attacks will increase again - unless attention, this time, does not fail.

Third, economists argue that countries can protect themselves from terrorism by offering terrorists safe haven in exchange for not being attacked. Other nations have little interest to help bear the cost of anti-terrorist cooperation so long as terrorism is directed against the United States.

What to do? First, the Federal Air Marshal program is an expensive hoax. Putting armed agents on a random flights still leaves many flights unprotected. While security is reassuring, reassurance is not security. Much better to install in all aircraft a "cockpit panic button" that irreversibly disables in-plane controls and switches command of the aircraft to remote controllers.

Second, government must beware of terrorist substitution and fortify or protect likely substitute targets and direct future terrorist attacks toward targets that are increasingly less costly to society. Hence, the current extensive effort to check the nation's vulnerability to biological and chemical terror attacks.

Third, government must minimize terrorist resources, both directly in terms of their finances, personnel and bases of operation, and indirectly by starving them of their recruitment base of young, impressionable minds.

Fourth, the United States must make clear to its old and new allies that the consequences of future non-cooperation will be severe. It is only because the United States can - and probably does - credibly threaten to cause major inconveniences for other nations that they suddenly cooperate so willingly and, within days of the Sept. 11 attacks , "discovered" so many terrorist cells directed against the United States.

I do not, at any rate, have any other good explanation of why so much "cooperation" is suddenly forthcoming, even from the most unlikely of states, such as Russia, Indonesia, Saudi Arabia and Pakistan.

Dr. Jurgen Brauer is an economics professor at Augusta State University's College of Business Administration. He can be reached at www.aug.edu/~sbajmb.