Friday, August 11, 2006

Reducing the Threat of Terrorism

In light of recent events, I think it is time for a refresher on the economic approach to reducing the threat of terrorism (note the careful avoidance of the absurd phrase "winning the war on terror").

The obvious objective of terrorists is the production terror which, they believe, will further some other cause. They typically produce terror by killing as many people as possible in highly visible fashion. Like suppliers of other products, terrorists seek the largest return at the lowest cost. As such, terrorists, like al Qaeda, have learned to focus their attacks on hard to secure but totally vital and highly visible aspects of Western society like planes, trains, and subways that are easily damaged by readily available and hard to detect technology.

As in other markets, reducing terrorism requires reducing demand for and/or the supply of terror. On the supply side, most of the tools used to inflict terror are cheap and easy to obtain. The most costly inputs are human. Specifically, terrorist masterminds require trustworthy people (i.e., people who will not turn them in) who are willing to risk jail (or worse) to plan and execute attacks. Unfortunately, the price of human inputs has fallen in recent years as the number of people willing to join terrorist organizations increased. Particularly troubling is the increase in supply of people willing to conduct suicide attacks. As long as terrorist masterminds can easily obtain people willing to die for the cause, we are in deep trouble.

Given that reducing the supply of terrorist acts is an obvious part of our objective, focusing on raising the cost of human inputs strikes me as the most effective strategy. Specifically, we need to increase the probability that those in contact with potential terrorists willingly contact law enforcement to report suspicious behavior (which apparently was the genesis of yesterday's arrests). More importantly, we need to try and understand what prompts individuals to join terrorist plots and, particularly, what makes them willing to become suicide attackers. Then, we need to aggressively change the situations/incentives that these individuals respond to.

Unfortunately, as I have discussed previously, supply side policies alone are unlikely to make a big dent in the threat of terrorism because demand for terror is probably very inelastic. Thus even policies which create big movements in the supply curve don't substantialy reduce terrorism. Unless the source of the reduction in supply also reduces demand, making suicide bombers (or other human inputs) more expensive probably only leads terrorists to change how they produce terror, not the amount of terror they produce. Ultimately, removing the threat of terror requires reducing the demand for terror.

Fortunately, I think there are options for simultaneously reducing both the supply and demand for terror. Hatred is an essential part of the terror market. Thus, reducing the supply and demand for hatred should be an important part of our strategy. I recommend reading Ed Glaeser's "Political Economy of Hatred" for a thorough discussion of this market.

This is the basic framework to use when thinking about these issues. Those of us opposed to current US foreign policy (e.g., the invasion of Iraq, use of torture, etc.) believe strongly that these actions have increased the threat of terrorism. These opinions are, at least in part, rooted in the belief that current policies increase the hatred that fuels terrorism. While we are not opposed to the concept that open, free, societies in the middle east would help reduce supply and demand for terror (by removing some of the incentives for hatred), we are skeptical that the US can create such societies in the middle east at will by using military force. Instead, we believe that the continuation of Bush's foreign policies leads to a net increase in the threats to US interests in both the short and long run because instead of reducing the key determinants of supply and demand these policies exacerbate them.

Update -- Kevin Drum speculates on the supply response to the latest attack being thwarted (and effectively demonstrates why it is so hard to reduce terrorism through supply-side policy):
I wonder: what lesson will al-Qaeda draw from this? Osama bin Laden may be a religious fanatic, but he's not stupid, and my guess is that he'll conclude that in a post-9/11 security environment it's simply impossible to keep a plot this big a secret. There are too many entry points and too many ways for a single mistake to derail the whole thing.

Bin Laden may be fond of big statements, but I wonder if this failure will convince him and his compatriots to think smaller? Is our future now more likely to be full of lots of little attacks rather than the occasional big one?

... he also provides the correct advice to people, like me, who are tired of being told that opposition to Bush foreign policy means you aren't interested in reducing terrorism:
Democrats have to make it absolutely clear, every single time somebody spouts this rubbish, that supporting the Iraq war doesn't mean you're "on offense against terrorism." Nor does opposing the war also mean you oppose fighting jihadism. The truth is closer to the exact opposite, and chapter and verse should follow if necessary.

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