As an economist, I am hardwired to believe that people respond to incentives. What possible incentive could there be to convince someone to end their life for a cause? In this piece, I hope to peer into the economics of terrorism. As is with all activities in the globalised world terrorism also requires resources. There are multiple options and sources and in the interest of remaining politically neutral, I do not wish to name any.
Conventional wisdom and ‘experts’ in the media help us think that terrorists come from low-income households, have poor education and no understanding of what they are doing. However, a pioneer in the field, Alan Krueger burned through Hezbollah newsletters to find out that a good majority of terrorists come from middle to high-income households, have a high school or college education, and appear to be smarter than average. So, if illiteracy or ignorance are not the motivation to be a terrorist, then what is? What motivates these people?
Political Scientist Ethan Mesquita argues for a model of terrorism where the high standards for terrorists arise from a specific selection process to ensure competent people join the organisation. In periods of low economic activity and absence of employment opportunities, a terrorist organisation has its pick of qualified and bright recruits. Papers published in 2012 by Berrebi, Benmelech and Klor show a positive relation between slow economic periods and quality of terrorist recruits. So what motivates terrorists?The answer is scarily profound, yet intuitive. The same thing that motivates you to wake up at 7 for your 9 A.M. job. Will raising employment opportunities eradicate terrorism? There is no way to tell.
Is there a way to conclusively predict terrorist in a large data pool without succumbing to biases and stereotypes? Despite many efforts only so much has been made public about the econometric research behind this, for various security reasons. Surprisingly, factors that seem to have no relation to terrorist activity are education, marital status, employment or proximity to a mosque. Ones that did show major relations to terrorist activity are; the extensive use of cash, changing addresses more often than normal, regular wire transfers to offshore entities and surprisingly purchasing life insurance. Life insurance does not cover suicide so why would bombers or terrorists buy life insurance? Based on the factors listed above and a few more confidential variables an algorithm was created to fish out terrorists. The success or failure of which remain unknown as we cannot count prevented attacks statistically.
Terrorism is effective because of the long-reaching after-effects it has on society. You are five times more likely to commit suicide than to die in a terrorist attack. Road accidents grew in number in the USA post 9/11. This was because people decided to drive out of the fear of flying. The xenophobia and general fear in the populous are costlier with respect to the direct impact of the attack. In terrorism, you succeed even if you fail. Another important facet of the economic cost of terrorism is the shift in focus from crime to terrorism which leads to a boom in crime rates (also visible after the 9/11 attacks). I conclude by pointing out that after reducing terrorism and mass destruction of people and property to a few grim numbers and variables, terrorism remains as threatening as it initially was. Although some countermeasures are available, there is work to be done in the field. The aftereffects remain as devastating as they initially were.