Economics focus:The rational response to terrorism
- From: "Pacifist" <mushroom200@xxxxxxxxxxx>
- Date: Tue, 26 Jul 2005 09:45:36 +0000 (UTC)
Economics focus
The rational response to terrorism
Jul 21st 2005
>From The Economist print edition
How people respond to terrorist attacks
CARRIED out by fanatics intending to kill, maim and spread fear,
suicide-terrorism is not an obvious subject for economic analysis. The
greatest costs are paid in blood, not mere money. Yet terrorists aim not
only to kill, but also to disrupt ordinary life. How far do they
succeed? Lots of pundits try to gauge the public mood after an attack,
and it often seems that one man's guess is as good as another's. Are the
citizenry defiant, resigned or intimidated? Here, economists can help,
for it is their instinct to look at what people do, not what they say;
to trust numbers, not anecdotes; and to look for clues in the
inflections of mass behaviour, not the hasty reflections of the mass
media.
Gary Becker, a Nobel laureate at the University of Chicago, is well
known for applying economic methods to realms of life that most of his
colleagues consider off limits. Terrorism is one such area. In a working
paper* circulated last year, he and Yona Rubinstein, of Tel Aviv
University, examine how the general public responds to the threat posed
by suicide-bombers.
The response is sometimes plain. The number of miles clocked up by
passengers on America's domestic airlines fell by 16 billion, or 32%,
between August and October 2001, according to America's Bureau of
Transportation Statistics. Even two years after the attacks of September
11th, air travel had yet to regain its 2001 peak.
Was this an overreaction? The response certainly appears greater than
the objective risks would warrant. According to Mr Becker, the public
reacts to terrorism much as it responds to outbreaks of rare but
fearsome diseases, such as BSE or ?mad-cow disease?. The chances of
infection may be slight, but that does not stop people shunning beef en
masse.
While such reactions are easy to understand, they are difficult for
economists to explain. Perhaps people are simply ignorant of the true
probabilities involved. But this argument, say Mr Becker and Ms
Rubinstein, misunderstands the way terrorism works. Killing is a means
of spreading fear. Terrorists introduce a small risk of violent death
into humdrum daily activities, such as taking a bus. Even if that tiny
risk is never realised, people suffer from the terror it sows. Mr Becker
and Ms Rubinstein argue that it is not the risk of physical harm that
moves people; it is the emotional disquiet. People respond to fear, not
risk.
On November 29th 2001 a suicide-bomber killed three Israelis and wounded
nine others on a public bus heading for Tel Aviv. According to Mr Becker
and Ms Rubinstein, Israel's public buses suffered an average of one such
attack a month in the year that followed. Not surprisingly, the bombs
had a profound effect on passengers, reducing the use of public buses by
about 30%, the two economists calculate.
But this large overall response masks some pronounced differences
between passengers. Casual users, who bought their tickets on the day of
travel, were much likelier to stay away after bombings: each attack cut
their use of buses by almost 40%. But regular travellers, who bought
weekly or monthly bus passes, were largely undeterred.
This is puzzling. It appears that neither the casual users nor the
regular passengers calibrated their response to the added risk they
faced. Suppose the frequency of attacks on buses doubled from one month
to the next. Passengers could take half as many trips and restore the
same objective risk they tolerated a month earlier. This is as true for
people who normally travel twice a day as it is for people who normally
travel twice a month. But passengers do not react in this way. Some
abandon buses altogether, others take as many trips as before.
Perhaps regular passengers ride out of necessity, not choice. If they
cannot afford a car or a taxi, they will take the bus whatever their
feelings about it. But Mr Becker and Ms Rubinstein found a similar
reaction to terrorism among patrons of big-city cafés, which are also
common targets of suicide-bombers. As the number of fatalities
increased, casual users stayed away; habitués spent as much money in
cafés as ever.
Habitual bravery
Fear of terrorism may or may not be irrational. But it is not
irresistible, Mr Becker and Ms Rubinstein conclude. With some effort,
people can overcome their fear, but they will do so only if it is worth
their while. For the dedicated patron of coffee shops, it is worth
conquering their qualms, since the effort pays off every time they enjoy
their favourite haunts. For the casual user, it is not. The threat of
terrorism spoils something they only enjoyed on occasion anyway.
Likewise, for someone who takes the bus twice a day, overcoming a fear
of terrorism is an ?investment? well worth undertaking.
The behaviour of bus riders and café customers suggests that this
investment in courage is a fixed cost, not a variable one. People do not
fight their fear each time they step on a bus; they choose to overcome
it once and for all, or not at all. Once a person has come to terms with
terror, it makes little difference to him whether he gets on a bus twice
a day or once a day. He may be subjecting himself to a slightly higher
risk of actual attack, but he is not adding anything to his fear of such
a catastrophe. And it seems to be the fear, not the risk, that sways
people.
In the morning rush hour, 500 tube trains serve London. Every weekday,
6,800 buses are scheduled to run in the city. Only three trains and one
bus were bombed on July 7th. But anyone who rode on public transport on
July 8th will have thought about the danger. Even if only a tiny
proportion of Londoners ever fall victim to terrorism, they are all
touched by it. Whether or not they are terrorised by it is a choice only
they can make.
* ?Fear and the Response to Terrorism: an Economic Analysis?, August
2004.
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