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On measuring the cost of terrorism

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With Simon Luechinger & Alois Stutzer

Journal of Economic Surveys 2007, abstract: “The trends and consequences of terrorist activities are often captured by counting the number of incidents and casualties. More recently, the effects of terrorist acts on various aspects of the economy have been analyzed. These costs are surveyed and put in perspective. As economic consequences are only a part of the overall costs of terrorism, possible approaches for estimating the utility losses of the people affected are discussed. Results using the life satisfaction approach, in which individual utility is approximated by self-reported subjective well-being, suggest that people’s utility losses may far exceed the purely economic consequences.”

Public Choice 2009 (did cite the previous one), abstract: “Terrorism has large social costs that are difficult to quantify for the well-known problems of eliciting people’s preferences for public goods. We use the LSA to assess these costs in utility and monetary terms. Based on combined cross-section time-series data, we estimate the costs of terrorism for France and the British Isles.We find large negative effects of terrorism on life satisfaction that translate into considerable compensating surpluses for a hypothetical reduction in terrorism, in particular for the serious conflict in Northern Ireland. The effects of terrorism are robust and differ across groups in accordance with prior expectations.”


References:

Frey, Bruno S. & Simon Luechinger & Alois Stutzer, 2007. "Calculating Tragedy: Assessing The Costs Of Terrorism," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 1-24, 02.

Bruno Frey & Simon Luechinger & Alois Stutzer, 2009. "The life satisfaction approach to valuing public goods: The case of terrorism," Public Choice, Springer, vol. 138(3), pages 317-345, March.

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