The Economic Impacts of Terrorist Attacks
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The Economic Impacts of Terrorist Attacks

Edited by Harry W. Richardson, Peter Gordon and James E. Moore II

Focussing on the economics of terrorism in the post 9/11 world, this book brings together original research based on the collaborative efforts of leading economists and planners. The authoritative and expert contributors use a variety of methodological approaches and apply them to different types of terrorist attacks (on airports, highways, seaports, electric power infrastructure, for example).
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Chapter 2: Transnational Terrorism: An Economic Analysis

Todd Sandler and Walter Enders


* Todd Sandler and Walter Enders INTRODUCTION On 11 September 2001 (henceforth, 9/11), the world watched aghast as two commercial airliners toppled the twin towers of the World Trade Center (WTC) and a third plowed into the Pentagon. Yet a fourth hijacked plane landed short of its intended Washington, DC target as passengers took matters into their own hands. Economic methods – both theoretical and empirical – have been applied by a small and growing group of economists to understand a host of issues associated with such terrorist events. These issues concern the policy effectiveness of alternative responses (for example toughening punishments, retaliatory raids and installing technological barriers), negotiation responses in hostage incidents, the terrorists’ choice of target, the economic impacts of terrorism, the provision of terrorism insurance, the curbing of interdependent risk, and others. Terrorism is the premeditated use, or threat of use, of a high level of violence by an individual or a subnational group to obtain a political objective through intimidation or fear directed at a large audience usually beyond the immediate victims. An essential aspect of this definition concerns the presence of a political objective (for example getting the United States out of the Persian Gulf states) that the terrorist acts or campaigns are designed to achieve. Incidents that have no specific political demands are criminal rather than terrorist acts – for example extortion for profit. Another crucial ingredient is the use of extranormal violence or brutality to capture news headlines. As the public becomes numb...

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