The Economics of Terrorism and Counterterrorism: What Matters, and is Rational-Choice Theory Helpful?

Abstract

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What is the relationship between terrorism and such potential root causes as poverty, education, religion, and mental health? Is it useful to discuss cause-effect relationships in terms of a rational-choice model? The questions are related in the following way. First, many have sought to explain terrorism in terms of various structural factors such as those mentioned, without reference to issues of choice. In this case, the factors are thought of as preconditions; the imagery is then of the form “Because of such-and-such powerful factors, people are driven to or drawn into terrorism.” The empirical evidence has tended to disconfirm such approaches, as decisively as one finds in social science. An alternative approach is to explain terrorism as the result of what individuals and groups perceive (whether or not correctly) as rational choices. It seems clear that simple-minded rational-choice models do not work well (models such as those that limit considerations solely to monetary reward benefits and costs). However, I shall argue that more-sophisticated rationalchoice models appear to have substantial explanatory power.

Keywords: Terrorism, rational choice, suicide terrorism, poverty, education

JEL Classification: D74, H56, Q54, C23