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The Economics of Terrorism

This paper treats terrorism as an economic phenomenon—as a way to understand it and to control it. It uses the tools of substitution, innovation, and cycles and concludes by noting the importance of intelligence and that the most valuable approach to defeating terrorism is that of denying resources to the terrorists rather than attempting to protect assets at risk. It notes that we are probably not any safer than before the implementation of the post–9/11 strategies and emphasizes that new initiatives must be undertaken to prevent terrorist use of weapons of mass destruction.