A bit over three years ago, an army of 19 men armed with pocket cutters
grounded in two hours every airplane of the world's mightiest country,
levelled the heart of its financial centre, sent its president initially
running for cover, and in one swift stroke changed the world's political
and economic landscape for years to come.
More than three years, two costly wars, several bankrupt airlines and
one jailed dictator later, how much does the bill of this one atrocity
amount to? Add in Bali, Beslan, the ETA and the IRA, Madrid, Egypt, the
Israeli-Palestinian conflict, Colombia and Kashmir, and how much does
terrorism really cost?
According to Bruno S. Frey, Simon Luechinger
and Alois Stutzer of the University of Zurich, much,
much more than you think.
In their CESifo Working Paper "Calculating
Tragedy: Assessing the Costs of Terrorism," the researchers provide
some chilling pointers. Disappearing tourism, plummeting foreign and domestic
investment, depressed domestic consumption, higher security-related expenses
and you are quickly talking about serious money. The compensation paid
out by the U.S. government and insurance companies to victims of September
11th alone, according to the Rand Corporation, amounts to at least US$
38.1 billion.
And this is only half the story. The fear of further atrocities, the pain
and mourning of the victims and their families, the feelings of insecurity,
the lengthy lines at airport checkpoints —in other words, the deterioration
in the quality of life must also be taken into account in any calculation
of the social costs.
In order to measure such intangible negative effects, the authors suggest
using independent surveys of individual subjective well-being such as
those conducted by Eurobarometer, using the data to ascertain the worth
respondents attach to the abatement of terrorism. Combining this data
with data on terrorism, one can simultaneously estimate the effects of
terrorism and income on well-being and, hence, the willingness-to-pay
for a hypothetical reduction in terrorism. The authors demonstrate this
in another
study, where they find, for example, that North Ireland residents
would be willing to forego up to 41% of their income if their territory
were as peaceful as the rest of the U.K. This finding goes a long way
to show just by how much the deterioration in quality of life exceeds
the monetarily measurable costs.
B. S. Frey, S. Luechinger und A. Stutzer: Calculating Tragedy: Assessing
the Costs of Terrorism, CESifo
Working Paper No. 1341
B. S. Frey, S. Luechinger und A. Stutzer: Valuing Public Goods: The
Life Satisfation Approach, CESifo
Working Paper No. 1158 |
