Introduction:
Tavares and Llussa attempt to offer an alternative
explanation for the emergence of terrorist cells in the years since September
11, 2001. The authors use economic indicators to evaluate the utility of
terrorist attacks.
Summary:
In order to evaluate the utility of terrorist attacks, the
authors examined existing literature pertaining to terrorist attacks and their
economic consequences. The analysis considered the impact of terrorism on
aggregate output, terrorism and specific sector activities, and terrorism and
economic policy.
Impact of Terrorism on Aggregate Output
The authors found that acts of terrorism, while extreme and
acute in nature, do not cause long term economic downfalls. The effect of the
attacks is much smaller than that of extended conflict or natural disasters.
However, high levels of consistent terrorist activity have a longer-lasting
economic effect. When looking at the impact of terrorist attacks on aggregate
stock prices, researchers found that the impact is short term and suffers from
diminishing returns. This is probably because of the diversification of stocks-
the attacks cannot affect multiple sectors at the same time.
Terrorism and Specific Sectors of Activity
Although the effect of terrorism is not particularly long
term, there is a discernible impact on specific sectors of the economy. Research
suggested that the most vulnerable sectors are the airline and tourism
industries. The attacks by their very nature target vulnerable sectors and
these are two of the most publicized sectors of the economy. The authors
contend that the insurance industry would likely be affected, but are unsure
whether the impact would be positive or negative.
Conclusion:
The paper concludes that the economic costs of terrorism are
not as significant as originally believed. The others believe that terrorism
garners too much attention in the political realm, and perhaps should take a
less public role. However, the authors do not sufficiently examine the trends
mentioned in the paper. I believe that further research would develop
actionable intelligence concerning exactly where and in which economic
environments terrorist groups are most likely to attack.
Source:
Tavares, J. and Llussa F. (2007). The Economics of Terrorism:
A Synopsis. The Economics of Peace and Security Journal, Vol. 2, No. 1
Retrieved from: http://carecon.org.uk/Chula/2007%20Llussa%20Tavares%20EPSJ.pdf
Posts
The short term economic costs can be devastating, as with 9/11, but the real costs come not from the damage, but from the infrastructure put into place afterward to -prevent- a repeat action. How much has it cost to vastly increase airport security in every airport nationwide? Can we attribute those costs to terrorism? Certainly, it's had an effect on our already-strapped-for-cash government.
ReplyDeleteHow did the authors say terrorism impacted economic policy? It's mentioned at the beginning but not covered later on?
ReplyDeleteI would think economic impact would be less important than something like cultural impact. For instance, with youth turning to al Quida in Afganistan, are they then more likely to not be active participants in society and then therefore economic growth.
ReplyDelete