The economics of terrorist behaviour

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The economics of terrorist behaviour deals with the effect of incentives on terrorist behaviour and the possible measures to reduce terrorism. Economic models not only predict and explain the behaviour of terrorists, but can also be used to describe the causes of terrorism and the dynamic interaction with anti-terrorism measures.

Insight in the impact of incentives on criminal and terrorist behaviour is of major relevance for urban planners since criminals and terrorists will most likely alter their behaviour in reaction to taken security measures in order to fulfil their goals.

Rational economic behaviour of terrorists

Economic theory assumes that terrorists behave like rational economic agents[1]. According to Sandler and Enders (2004)[2], terrorists commit terrorist actions as rational actors in order to obtain their tactical and strategic goals, and in this way maximise utility[3]. According to e.g. the economists Frey and Lüchinger (2004)[4], the linked cost descend from the use of resources and to the opportunity cost of violent behaviour (e.a., the possibility to reach the strategic goals in other, less violent, ways). Hence, the implementation of security measures will increase the cost of a terrorist, while, for example, a growing dissatisfaction among a certain ethnic group will decrease the opportunity cost of, increasing the use of violent behaviour. An illustration: Within this [economic] framework, even suicide bombers have been modelled as rational agents: at the most basis, suicide bombers value the choice of "life in paradise" and worship as martyr higher than their present life. Staying alive, in fact, may not only imply foregoing paradise, but also loosing group solidarity in real life (Wintrobe 2001).[5]

Number of Terrorist Incidents

Socio-economic causes of terrorism

In general, roots of terrorism can be found in certain poor or unfavourable conditions which result into terrorism. The central question is whether these "roots" can be found in economic factors (e.g. poverty), political factors (e.g., repression) or social factors (e.g. religious, ethnic, geography). According to Schneider et al (2008)[5], this question is of great relevance for counter-terrorism, e.g., to know what kind of preventive measures should be implemented (focussed on economics or political development). Some of the economic factors that could cause terrorism, are:

  1. Relative economic deprivation is according to some scholars a cause of terrorism because it manifests itself in poverty, income inequality and a lack of economic opportunities. Economic deprivation, in turn, makes it easier for terrorist organisations to recruit frustrated followers.[5]
  2. Another economic factor of importance is socio-economic change, fostered by the process of modernisation, creating different types of strain (e.g, Western ideologies) and new forms of living (e.g. shift from agricultural to urban societies)[5]. According to Robison et al (2006)[6], all of these factors create grievances associated with economic, demographic or social strain. Terrorist organisations are able to capitalise on these grievances of ˜modernisation losers" on the one hand, and on the other hand, are able to disseminate their opinions more effectively using the modern means of communication and transportation (Ross, 1993[7]).
  3. The economic and political integration is sometimes regarded as a cause of terrorism. Here, foreign policy, alliance structures and foreign dominance (Western or US supremacy), may incite terrorist activity ( Bergesen and Lizardo, 2004[8]). For example, Palestine terrorist activity in Europe is triggered by the Israeli-Palestine conflict.

Other discussed factors that cause terrorism are the political and institutional order, political transformation and instability, civilisation clashes and finally, contagion in time and geographically[5].

Dynamic interaction between terrorism and counter-terrorism

As illustrated above, there are many studies available which provide overviews of the impacts of terrorism and what causes it. However, according to Schneider et al. (2009)[9], these studies do not differentiate between the various (temporal) stages of terrorist events and their repercussions. The authors distinguish three phases:

  1. The direct short-run response triggered by the terrorist event itself (including the primary economic impacts);
  2. the medium- to long-term responses induced by fear and resulting in security measures by public and private agents;
  3. the reactions by terrorists in responds to both previous phases.

According to Schneider et al. (2009), most of the studies attribute the dynamics of terrorism and its repercussions to the terrorist event itself, but the authors point to the fact that the extent of secondary impacts of terrorism is determined to a large extent by the reactions of targets, rather than the terrorist events themselves. As a result, the authors refer to Endlers and Sandler (2006)[10], suggesting that security agents fail to take the full dynamic costs into consideration while implementing security measures[5].Overall, Schneider et al. (2009) conclude that, in fact, terrorism, even if it has not become more frequent, has already and will increasingly

  • become more severe,
  • shift location towards places with relatively less security measures in place, such as the Middle East and Asia, and
  • has adapted its strategies and organisational structures to evade proactive policies.

An example:

The high number of airplane hijackings in the 1970s caused airports to increase their use of metal detectors, therefore increasing the relative cost of hijackings for terrorists. As a result, terrorists switched from hijackings to kidnappings. The high number of kidnappings caused governments to increase security measures for foreign diplomats, so terrorists replaced kidnappings with suicide bombings. (Chlebik, K., 2010)[11].

Yet, although economic literature suggests that the ˜relative price" of terrorist activities is a critical determinant of terrorist behaviour, there are other critical determinants such as the motivation of terrorists from a psychological point of view, or a legal point of view[12]. Terrorist leaders, for instance, are more likely to circumvent security measures than terrorist recruits due to their intrinsic motivation.

Related subjects

Footnotes and references

  1. A rational economic agent is an agent with clear preferences, who models uncertainty via expected values, and "always chooses to perform the action that results in the optimal outcome for itself from among all feasible actions". Source: Wikipedia. Online: A rational agent is also referred to as the Homo Economicus.
  2. Sandler, T. and W. Enders (2004): An Economic perspective on Transnational Terrorism. European Journal of Political Economy 20(2): 301-316. In: Schneider, F., T. Brück and D. Meierrieks (2009): The Economics of Terrorism and Counter-Terrorism: A Survey.
  3. Utility is a representation of preferences over some set of goods and services. Source: Wikipedia Online:
  4. Frey, B. S., and S. Lüchinger (2004): Decentralisation as a disincentive for terror. European Journal of Political Economy No.20 p. 509-515.
  5. 5.0 5.1 5.2 5.3 5.4 5.5 Schneider, F., T. Brück, and Karaisl, M. (2008): A survey of the Economics of Security. Economics of Security Working Paper 1.
  6. Robinson, K.K, E.M. Crenshaw and J.C. Jenkins (2006): Ideologies of Violence: The Social Origins of Islamist and Leftist Transnational Terrorism. Social Forces 84(4): 129-145. In: Schneider, F., T. Brück and D. Meierrieks (2009): The Economics of Terrorism and Counter-Terrorism: A Survey
  7. Ross, J.I (1993): Structural Causes of Oppositional Political Terrorism: Towards a Causal Model. Journal of Peace Research 30(3): p.317-329. In:Schneider, F., T. Brück and D. Meierrieks (2009): The Economics of Terrorism and Counter-Terrorism: A Survey.
  8. Bergesen, A.J and O. Lizardo (2004): International Terrorism and the World-System. Sociological Theory 22(1): p.38-52 In: Schneider, F., T. Brück and D. Meierrieks (2009): The Economics of Terrorism and Counter-Terrorism: A Survey
  9. Source: Schneider, F., T. Brück and D. Meierrieks (2009): The Economics of Terrorism and Counter-Terrorism: A Survey.
  10. Endlers, W. and T. Sandler (2006): The political economy of terrorism. Cambridge, Cambridge University Press. Quoted in: Schneider, F., T. Brück, and Karaisl, M. (2008): A survey of the Economics of Security. Economics of Security Working Paper 1
  11. Chlebik, K. (2010): Terrorism and Game Theory: From the Terrorists' Point of View. Pepperdine Policy Review: Vol. 3, Article 3.
  12. See, for example: Phillips, P.J., and G. Pohl (2011): Terrorism, Identity, Psychology and Defence Economics. International Research Journal of Finance and Economics. Issue 77. EuroJournals Publishing.