Economic impact of security measures

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With the help of security measures it is possible to eliminate the risk of a terrorist or criminal event, or at least reduce the risk. Security measures, however, also generate economic impact, here referred to as the economic impact of security measures. This includes the costs of securing a specific urban object, but also the costs and benefits regarding the secondary impact of security measures.

Description

Security measures intend to increase the level of security, deterring a security event and/or at least mitigating the negative socio-economic impact of crime and terrorism. There are, however, costs involved with the improvement of urban security, also referred to as the "Costs of Mitigation"[1]. These costs contain, first of all, direct investments in equipment, training and operational costs by private agents, companies/developers and the public authorities, exacting economic cost/impact. Secondly, the mitigation effort generates various types of secondary effects, for example, in terms of delays (think of airport security), inconveniences (e.g. due to access control), and diffusions in the business environment, creating an unintended fear factor.

Whether these primary and secondary costs are making sense from an economic point of view depends on many factors, and can be answered by two distinct sets of questions:

  1. Are the envisioned security measures cost effective from a socio-economic point of view, or are there better alternatives?
  2. Which specific agents (individuals, companies, sectors, authorities) are affected by the security measures and to which extend? How do the envisioned measures adjust the behaviour of these agents, and of course the behaviour of criminals/terrorists?

The most cost-effective security prevention strategies do not just take the impact on crime and/or terrorism into account, but also the geographical, cultural, socio-economic and social characteristics. According to Feins et al. (1997)[2] these characteristics are in general so unique and complex, that the selection of security measures should always involve a coalition of local stakeholders and objective experts. Moreover, the attempt to replicate a successful security strategy will most likely also fail according to professor Paul Ekblom (2008)[3] as preventive action is very "context-dependent" for its success[4].

The role of economic tools

Economic tools such as the social cost-benefit analysis (first question) and economic impact study (second question) can help the decision makers to answer the above mentioned questions, and to prevent wasteful expenditures on security (of course in collaboration with insights from criminology, sociology, etc.).The basic starting point of any cost-benefit analysis of security measures is to estimate the costs. This is, however, much more complex than it might seem at first sight, since the total cost of security does not just contain the upfront investment costs in security equipment, training, management, etc., but also much less tangible effects like the value of time, effects on system functionality (e.g. logistic systems), macro-economic effects (on GDP), the opportunity cost of public spendings on security, and consumer preferences/behaviour (e.g. the dislike of very present security measures like screening of personal belongings). As a result, different cost estimates of security measures are not always in agreement with results strongly depending on the definition of costs and the methods used.

Estimation of the expected benefits of security measures is the second step. These benefits basically depend on the magnitude of the risk of a security threat (crime and terrorism), and the reduction in these expected losses (in economic terms). Hence, if the risk of a certain event is low, the potential benefits of improved security will also be low, no matter how expensive this measure is. Or, the other way around: If a certain risk is very high, even a small risk reduction will generate substantial benefits. Since both the magnitudes of risks and the impact of security measures are difficult to estimate, it can be helpful to think in terms of how much a certain security measure should reduce the risk of a security threat to be cost-effective. For example, if surveillance measures in a particular urban area cost 10 million euro per year, and the expected losses of crime and terrorism in that area are 100 million euro per year, a 10 percent reduction in risk would justify the cost of this surveillance measure (assuming it is realised by this particular security option, and not different measures or circumstances). To do this, economists use different sets of assumptions and parameters about criminal and terrorist behaviour, crime statistics, risk assumptions, etc. enabling them to analyse the cost-effectiveness of a single or multiple security measures[5].

Types of impact of security measures

Although largely similar, there are differences in the economic effects of (see also clickable map below):

Economic effects of anti-crime security measuresEconomic effects of anti-terrorism security measuresSecurity measures crime & terrorism.jpg
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Footnotes and references

  1. Rose, A & S. Chatterjee (2011): Benefits and Costs of Counter-Terrorism Security Measures in Urban Areas. Research sponsor: Department of Homeland Security. p. 6-7
  2. Feins, J.D., J.C. Epstein & R. Widom (1997): Solving Crime Problems in Residential Neigborhoods: Comprehensive Changes in Design, Management, and Use. U.S. Department of Justice. Office of Justice Programs. National Institute of Justice.
  3. Ekblom, P. (2008): The 5Is framework: a practical tool for transfer and sharing of crime prevention and community safety knowledge. Design Against Crime Research Centre.
  4. "It relies on practitioners intelligently following a process of identifying and solving a given crime problem, and customising generic preventive principles to activate specific causal mechanisms of prevention which fit the current context."Source: Ekblom, P. (2008): The 5Is framework: a practical tool for transfer and sharing of crime prevention and community safety knowledge. Design Against Crime Research Centre.
  5. In practice, serious targets like transportation hubs or utility objects are hardly ever protected by a single security measure. See e.g., Jackson et al (2012): Efficient Aviation Security. Strengthening the Analytic Foundation for Making Air Transportation Security Decisions. Rand Homeland Security and Defense Center, p.54.