The Costs of Terror

Is reason possible in the face of global terrorism? Sure, argues a recent paper by Daniel Meierrieks, Fellow of the Research Unit Migration, Integration, Transnationalization and Tim Krieger (Albert-Ludwigs-Universität Freiburg). While occurrences of terrorism are hard to foresee, economic modeling which assumes terrorists to act like conventional stake-holders - rational and risk wary - allows for a more nuanced assessment of terrorism’s costs and the ways to counter it.

Undoubtedly, terrorism poses a major threat to the European Union and its member states. Estimations of the toll terrorism has taken on industry, government and general welfare have, however, mostly remained vague. On the other side, political actors’ responses have often been unsustainable and repressive. By developing a theoretical model for estimating terrorism’s costs and evaluating the efficacy of different types of political responses to it, social scientists Daniel Meierrieks and Tim Krieger aim to change this state of affairs.

With an economist’s eye for costs, benefits and terrorism’s hidden rationalities, the authors coolly assess the uneasy situation governments find themselves in in confronting acts of terror. They distinguish between terrorism’s direct costs and its indirect consequences. While calculations are usually based on the former, the authors argue that it is in fact terrorism’s indirect toll – through social disruption, capital diversion or increased financial uncertainty – that results in higher costs. Concurrently, political answers have all too often contended themselves with knee-jerk responses. By contrasting “stick” and “carrot” approaches to counter terrorism, Meierrieks and Krieger are able to show the insufficiencies of contemporary measures. They cite the diversion of funding from welfare programs in order to satisfy security concerns and likely cases of states “free-riding” on coordinated counter-terrorism action as examples. Both pose major obstacles to preventing terrorism from taking too big a toll.

The study Tim Krieger and Daniel Meierrieks (2019): "The Economic Consequences of Terrorism for the European Union" was published in: Raphael Bessong (ed.): Terrorismus als Herausforderung der Europäischen Union. Baden-Baden: Nomos.