Edited by Harry W. Richardson, Peter Gordon and James E. Moore II
Chapter 10: Designing Benefit–Cost Analyses for Homeland Security Policies
10. Designing beneﬁt–cost analyses for homeland security policies V. Kerry Smith and Daniel G. Hallstrom* INTRODUCTION The purpose of this chapter is to outline the methodological and empirical issues associated with developing beneﬁt–cost analyses for homeland security policies. The 9/11 attack on the United States transformed domestic and international perceptions of the ability of the public sector in developed economies to provide a secure environment for daily living. Security at this very general level aﬀects nearly every aspect of life, including of course those individual behaviors that inﬂuence market outcomes. When one includes the scope of the impact on non-market behaviors that are motivated by fear and anxiety, it is diﬃcult to imagine how current policy initiatives can restore earlier perceptions about our security.1 For practical purposes, the change in the background environment for all private and public choices is probably best treated as irreversible. As a result, we argue that the task of measuring the net beneﬁts provided by homeland security policies should not be treated as an eﬀort to restore a pre-9/11 baseline. Homeland security policy can reduce risk and/or reduce consequences from terrorist activities. Because there is no single physical measure that allows the diverse possible terrorist events to be reduced to a single loss metric, the task of specifying the connection between policies and risk reductions is likely to be complex.2 Equally important, risk reduction can arise through public protection, self-protection or some combination of these two...
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