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Certainly since September 11, 2001, if not earlier, the “war” against international terrorism has become the central organizing principle of United States foreign and military policy. Like most wars, the war against international terrorism is largely defined in terms of military and political objectives, yet other considerations are also of importance. Terrorism is a complex phenomenon that is difficult to pin down. As the terrorism expert Jessica Stern has reminded us, “The student of terrorism is confronted with hundreds of definitions in the literature.”2 Many analyses of terrorism, along with the prescriptions for dealing with it, emphasize its political, social, ideological, and economic aspects, although these factors are usually given less emphasis than security factors in policy formation. Popular discussions of the economic aspects of terrorism tend to focus on how to cut off the flow of financial resources to terrorist organizations, how to allocate budgetary resources to fighting terrorism, and whether economic deprivation fosters international terrorism. Yet the economic aspects of terrorism are far more complex. There are economic costs that are the direct result of terrorist activities, and there are a variety of costs beyond those delineated by government budgets crafted to fund a war against terrorism. The sizeable nature of these costs suggests that enhanced efforts to weaken the sources of terrorism could create substantial economic benefits. The linkage between terrorism and poverty is too simple, and often incorrect. Instead, the links have to do with the structure of rewards and systems of incentives that evolve in many societies. And the role of economics in fighting terrorism can involve far more than trying to disrupt financial networks. Terrorism, and the measures taken to counter terrorism, both carry economic costs. Yet terrorism does have economic sources, and the attempt to offset, and even defeat, terrorism would benefit from the adoption of economic strategies. This paper will discuss four aspects of the economics of terrorism, delineating the costs of terrorism, evaluating the costs of fighting terrorism, assessing the sources of terrorism, and presenting some alternatives in the fight against terrorism.

Thinking Through Terrorism Some Economic Considerations in the U.S. War on Terrorism