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Dealing with Terrorism – Stick or Carrot?

Bruno S. Frey

Emphasising a positive approach to dealing with terrorism (the carrot), this book provides a critique of deterrence policy (the stick) which can be ineffective and even counterproductive, and proposes three alternative and effective anti-terrorist policies: Decentralisation reduces vulnerability to terrorist attacks. A system with many different centres is more stable due to its diversity, enabling one part to substitute for another; Positive incentives can be offered to actual and prospective terrorists not to engage in violent acts. Incentives include: reintegrating terrorists into society, welcoming repentents and offering them valued opportunities; and Diverting attention by naming several terrorist groups potentially responsible for a particular terrorist act. The government thus supplies more information than the terrorist responsible would wish.
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Chapter 6: Providing Positive Incentives Not to Engage in Terrorism

Bruno S. Frey


POSITIVE AND NEGATIVE SANCTIONS Basic Issues The dominant logic in both the literature and the practice of antiterrorism always takes ‘sanctions’ to be negative. The threat of punishment is part and parcel of deterrence policy. The intention is to dissuade actual and potential terrorists from undertaking terrorist acts, by making it clear that this involves heavy costs to them. But terrorists can also be deterred from their activities by rewarding them for abstaining from violent acts. In such a case, the sanctions used are positive. In economic theory, positive and negative sanctions are, in principle, considered to be symmetric. Both change the opportunity set of the units sanctioned. An increase in relative costs induces those being sanctioned to systematically reduce the corresponding activity (generalised relative price effect). The symmetry is also reflected in the fact that costs are always taken to be opportunity costs, which means that one always compares with the next best alternative. The opportunity costs stay the same, whether a government offers terrorists a reward of a given sum of money for compliance, or threatens them with a penalty of the same amount for failure to comply. If, however, it is known that the sanctioned units react differently to rewards than to punishments (as will be argued here), it is important to maintain the distinction. Economic policy considers both negative and positive inducements. In environmental economics, for example, both incentive taxes and incentive subsidies are proposed to make producers and consumers take into...

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