The real cost of terrorism

Because of my hurry, for a while I did not realize that something was different on campus. Then I noticed that all of the students and university staff were staring at TV screens like robots without making a sound. After a while, the immediate shock passed and many Americans started to make angry comments about Muslims. Everybody knew that I was a Muslim and, in fact, a devout one. I had never hidden that and, in any case, it would be impossible with a very distinctive Muslim name like mine. I remember that one of my close friends (Christian, but not American) warned me that Americans were indeed very angry because of the shock. He simply wanted me not to wander around too much. In later months, my professors kindly warned me about students possibly making inappropriate remarks or physical moves. After that event, nothing was the same. My wife wears a Muslim headscarf, so we felt uneasy in public. I stayed in the US for three more years after Sept. 11. To be honest, I never personally experienced any insult, or any inappropriate behavior, for that matter. However, we heard some rumors about things happening to Muslims in other cities. These rumors and complex emotions had a significant impact on my decision to return to Turkey just after I received my Ph.D. Economists have estimated the costs of terrorist acts like the Sept. 11, London, Madrid and Mumbai bombings. Similarly, the economic costs of the prolonged separatist terrorist attacks of the Basque separatist group ETA in Spain and the Kurdistan Workers’ Party (PKK) in Turkey have been estimated. Prolonged terrorist events have substantial costs, not just for the region involved, but also for the whole country. In the long run these separatist operations are estimated to reduce the average income level in those regions by 5-10 percent. Turkish politicians state that PKK terrorism cost Turkey trillions of dollars. Although I do not know how they came up with this number, it sounds reasonable.

Single acts of terror like the London bombings cost much less than prolonged ones. The direct costs of these events are usually miniscule and temporary. However indirect costs can be bigger by several orders of magnitude. First, the public authorities take preventive measures. They increase the presence of police and intelligence officers. The expenditure on these usually increases by substantial amounts. Moreover, some measures like increased security at airports have inconvenience, time and productivity costs for the civilian population. Sometimes there are also unexpected costs. Several months ago, a mentally ill German pilot intentionally crashed a plane with many passengers on board into a mountain. Other individuals on the plane could not stop the pilot since the cockpit was designed to be inaccessible from the outside. That design was mandated after Sept. 11, 2001 to prevent terrorists from taking control of planes.

In extreme cases, a single terrorist act can spark prolonged, unconventional battles. Partly as a result of the Sept. 11 attacks, the US invaded Afghanistan and Iraq. These wars cost the US several trillion dollars. More importantly, hundreds of thousands, if not millions, of Afghans and Iraqis died in the wars and the aftermath. More than 10 years after the invasions, neither country has established a stable state system. At the same time, the US lost a great deal of its power and legitimacy. As a result, it is much less willing to become involved in world events. Needless to say, the Sept. 11 attacks and subsequent retaliations by US are partly responsible for much of the terrorist activity that has occurred since then.

Nonetheless, this week France bombed Islamic State in Iraq and the Levant (ISIL) towns. We will see whether or not the conflict will escalate.

Beyond the physical battles, the biggest cost of terrorist acts is the closing of the borders to outsiders. Not just physical borders, but intellectual, scientific, cultural, social, economic and other types of interactions with outsiders are greatly limited because of the mistaken belief that our lives, lifestyles, and civilizations are facing existential threats. In reality, the threat of an act of terrorism is much lower than we consider it to be. However, because of these relatively miniscule (and potential) threats, we deprive ourselves of the great and real benefits we could obtain in interactions with those who are not just like us. One of the fundamental pillars of economic theory suggests that only exchanges between diverse entities create wealth, not exchanges between similar entities. We should also remember that the exchanges benefit both sides; similarly, eliminating transactions hurts both sides. One final note, I have read that Paris was chosen as the best city for international students to get a postgraduate education. I hope it will stay the same in the coming months.