Terrorism's opportunity costs

January 9th, 2010

“Traveling to Singapore - somewhere over the Indian Ocean - 3:30 AM Singapore Time.

International travel brings home the costs that terrorism imposes on a society in a tangible, personal way. Before my departure, news media were filled with stories of the Nigerian ‘undergarment bomber.’ Investigations were initiated and more planned. President Obama met with key officials. He then spoke gravely, in a nationwide address, about further steps that would be taken to protect air travelers against terrorism. Administration opponents sought pollitical opportunities that security lapses might provide in the upcoming Congressional elections. For a few days, debates over health care legislation, the state of the economy and the recently concluded climate change conference were eclipsed by this story of the moment.

I listened to these stories in the relative tranquility of my rural Virginia home as I sought to assemble clothing, electronic equipment, books and other sundries for my upcoming six month stay in Singapore. As I sorted, organized, packed and weighed my baggage, the challenging first phase of my journey, transiting security at Dulles International Airport was never far from my mind.

Travelers now accept the indignities of airport security checks as part of life. I am not aware that anyone has attempted to calculate the costs-per-passenger of the long lines, and extra time set aside for early airport arrivals (I was advised to allow four hours prior to my flight time for possible emergencies) and intrusions on one’s privacy. Data on the physical and personnel costs of enhanced security must be more readily available, though I have not seen the numbers. The diversion of resources from more productive active economic activity must be staggering.

Some years ago a colleague and I calculated the economic costs of Sri Lanka’s two civil wars, the conflict between Tamil militants and government forces in the Island’s North and between Sinhalese militants and government forces in the South. Both conflicts also included incidents of urban terrorism that disrupted the tourist trade and commercial centers. We calculated the direct physical costs of the conflict and more indirect economic costs, for example the differences between economic growth forecast when Sri Lanka was touted as a development success story and what actually occurred after the “Island Paradise” became engulfed by conflict. Then we estimated the number of militants in each of the dissident movements. Finally, we divided the aggregate economic costs of the conflict by the number of militants to obtain a cost per militant. We calculated that these costs approximated the value of a generous scholarship to a top US university or a very generous grant that might be used, for example, to capitalize a small business.

In a paper reporting these results and, subsequently in my book, Paradise Poisoned: Learning about Conflict Terrorism and Development from Sri Lanka’s Civil wars, we Characterized this number as the “opportunity costs” of violent conflict. A simple way of viewing this technical term in economic analysis is as the “might have beens.” The scholarship and business development programs were, at least in principle, options that could have been chosen by successive Sri Lanka political leaders before they became trapped in the cycle of militant actions and counter-terrorist responses. I argued that the causes of terrorism are known and preventable and that political leaders always have a choice, even when counter terrorist responses emphasizing security are justified with the assertion that ‘we had no choice.’

As I transited successive layers of airport security I reflected how leaders of the developed world and especially US leaders had become entrapped in much the same way that Sri Lanka’s leaders became entrapped in the 1970s and 1980s. But this cycle has infected more than a small island nation that was once described as “paradise.” Its consequences have been global and the costs have been grievous.

There has to be a better way.