The Economic Cost Of Terrorism

After the Christmas incident over Detroit this past weekend, I wanted to take a moment to reflect on the costs of terrorism. Obviously, the biggest reason why terrorism is so awful is due to the loss of life resulting from successful attempts. That makes the most major cost emotional/psychological. Not only are the friends and family of those killed stricken with the loss, but even strangers often fear that a terrorist will arbitrarily strike out at them. These are clearly the most significant costs, but they aren't the only ones: there's also economics.The cost is quite obvious for successful attempts. If you think about 9/11, for example, its tab was as much as $95 billion. That includes not only the buildings and planes ruined, but also the hit to the economy with job losses in the recession that it helped to fuel. The costs might not be quite so tangible, but even unsuccessful attempts like last weekend's have economic cost. Let's think about what's changed since Friday's attack. First, TSA has instituted some inane rules. Here are two, from the Washington Post:

-- U.S.-bound passengers aboard international flights must undergo a "thorough pat-down" at boarding gates, focused on the upper legs and torso. All carry-on baggage must be inspected. -- Passengers must remain seated for the final hour before landing. During that time, they may not have access to their carry-on baggage or hold personal items on their laps.

I'm not looking forward to my flight next weekend, which is sure to include delays and long security lines. But such changes have real economic costs. Let's take the first. If you don't hire scores of new TSA officers, then security will almost certainly take a lot longer to get through. If it takes an hour more, then for business travelers, that's an hour of lost time: it's impossible to be productive while waiting on line at security. If it results in delays, then that's pretty non-productive time too, sitting (if you manage to get a seat) at the gate. Time is money. If you hire more TSA officers, then maybe you can do the pat-downs and detailed searches more efficiently, avoiding delays. But then another cost results: you have to pay the salaries and benefits of those new employees. The second new rule has costs too. That last hour when you must, apparently, sit motionless in your seat is sure to be utterly non-productive. Anyone who hoped to get another hour of work done on his or her laptop during that time won't be able to. Again, productivity declines, especially for business travelers. These particular rules are pure security theater, but even if the U.S. decides to take measures that actually could prevent terrorism instead, those are expensive too. More surveillance? More or continued wars on Islamic terrorists? None of that stuff comes for cheap. So any way you cut it, even last weekend's "failed" attack succeeded in hitting Americans' wallets. Even though no loss of life resulted, and the plane likely suffered little damage, the attack will have long-lasting repercussions. That's not to say that the U.S. shouldn't be more secure -- obviously it needs to be. But the heavier security measures that result won't come for free: we will all be paying for them.

This article available online at:

http://www.theatlantic.com/business/archive/2009/12/the-economic-cost-of-terrorism/32650/