IDEAS home Printed from https://ideas.repec.org/p/cep/cepdps/dp1079.html
   My bibliography  Save this paper

Fear and the Response to Terrorism: An Economic Analysis

Author

Listed:
  • Gary S. Becker
  • Yona Rubinstein

Abstract

This paper offers a rational approach to the economics and psychology of fear and provides empirical evidence that supports our theory. We explicitly consider both the impact of danger on emotions and the distortive effect of fear on subjective beliefs and individual choices. Yet, we also acknowledge individuals' capacity to manage their emotions. Though costly, people can learn to control their fear and economic incentives affect the degree to which they do so. Since it does not pay back the same returns to everyone, people will differ in their reaction to impending danger. We then empirically examine the response of Israelis to terror incidents during the 'Al-Aqsa' Intifada. Consistent with our theory, the overall impact of attacks on the usage of goods and services subject to terror attacks (e.g. bus services, coffee shops) reflects solely the reactions of occasional users. We find no impact of terrorist attacks on the demand for these goods and services by frequent users. Education and the exposure to media coverage also matters. We find a large impact of suicide attacks during regular media coverage days, and almost no impact of suicide attacks when they are followed by either a holiday or a weekend, especially among the less educated families and among occasional users.

Suggested Citation

  • Gary S. Becker & Yona Rubinstein, 2011. "Fear and the Response to Terrorism: An Economic Analysis," CEP Discussion Papers dp1079, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1079
    as

    Download full text from publisher

    File URL: https://cep.lse.ac.uk/pubs/download/dp1079.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gordon Dahl & Stefano DellaVigna, 2009. "Does Movie Violence Increase Violent Crime?," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 677-734.
    2. Markus K. Brunnermeier & Jonathan A. Parker, 2005. "Optimal Expectations," American Economic Review, American Economic Association, vol. 95(4), pages 1092-1118, September.
    3. Timothy Besley & Robin Burgess, 2002. "The Political Economy of Government Responsiveness: Theory and Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1415-1451.
    4. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-319, June.
    5. Viscusi, W Kip, 1993. "The Value of Risks to Life and Health," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1912-1946, December.
    6. David A. Jaeger & M. Daniele Paserman, 2008. "The Cycle of Violence? An Empirical Analysis of Fatalities in the Palestinian-Israeli Conflict," American Economic Review, American Economic Association, vol. 98(4), pages 1591-1604, September.
    7. Stefano DellaVigna & Ethan Kaplan, 2007. "The Fox News Effect: Media Bias and Voting," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1187-1234.
    8. Andrew Caplin & John Leahy, 2001. "Psychological Expected Utility Theory and Anticipatory Feelings," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 55-79.
    9. Ignacio Palacios-Huerta & Oscar Volij, 2008. "Experientia Docet: Professionals Play Minimax in Laboratory Experiments," Econometrica, Econometric Society, vol. 76(1), pages 71-115, January.
    10. Eric D. Gould & Esteban F. Klor, 2010. "Does Terrorism Work?," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1459-1510.
    11. Pape, Robert A., 2003. "The Strategic Logic of Suicide Terrorism," American Political Science Review, Cambridge University Press, vol. 97(3), pages 343-361, August.
    12. Efraim Benmelech & Claude Berrebi, 2007. "Human Capital and the Productivity of Suicide Bombers," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 223-238, Summer.
    13. Alan B. Krueger & Jitka Maleckova, 2003. "Education, Poverty and Terrorism: Is There a Causal Connection?," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 119-144, Fall.
    14. Cameron, A Colin & Trivedi, Pravin K, 1986. "Econometric Models Based on Count Data: Comparisons and Applications of Some Estimators and Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 29-53, January.
    15. Ignacio Palacios-Huerta, 2003. "Professionals Play Minimax," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 395-415.
    16. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    17. Eckstein, Zvi & Tsiddon, Daniel, 2004. "Macroeconomic consequences of terror: theory and the case of Israel," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 971-1002, July.
    18. Matthew Gentzkow & Jesse M. Shapiro, 2008. "Preschool Television Viewing and Adolescent Test Scores: Historical Evidence from the Coleman Study," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 279-323.
    19. Alan B. Krueger, 2007. "Introduction to What Makes a Terrorist: Economics and the Roots of Terrorism," Introductory Chapters, in: What Makes a Terrorist: Economics and the Roots of Terrorism, Princeton University Press.
    20. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-846, September.
    21. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    22. A. C. Cameron & P. K. Trivedi & Frank Milne & J. Piggott, 1988. "A Microeconometric Model of the Demand for Health Care and Health Insurance in Australia," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 85-106.
    23. Magat, Wesley A & Viscusi, W Kip & Huber, Joel, 1988. "Consumer Processing of Hazard Warning Information," Journal of Risk and Uncertainty, Springer, vol. 1(2), pages 201-232, June.
    24. Moses Shayo & Asaf Zussman, 2011. "Judicial Ingroup Bias in the Shadow of Terrorism," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1447-1484.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jetter, Michael, 2017. "Terrorism and the Media: The Effect of US Television Coverage on Al-Qaeda Attacks," IZA Discussion Papers 10708, Institute of Labor Economics (IZA).
    2. Kis-Katos, Krisztina & Liebert, Helge & Schulze, Günther G., 2014. "On the heterogeneity of terror," European Economic Review, Elsevier, vol. 68(C), pages 116-136.
    3. Freytag, Andreas & Krüger, Jens J. & Meierrieks, Daniel & Schneider, Friedrich, 2011. "The origins of terrorism: Cross-country estimates of socio-economic determinants of terrorism," European Journal of Political Economy, Elsevier, vol. 27(S1), pages 5-16.
    4. Michael Jetter, 2017. "Mediated Terrorism: US News and Al-Qaeda Attacks," CESifo Working Paper Series 6804, CESifo.
    5. Jetter, Michael, 2019. "The inadvertent consequences of al-Qaeda news coverage," European Economic Review, Elsevier, vol. 119(C), pages 391-410.
    6. Friedrich Schneider & Tilman Brück & Daniel Meierrieks, 2010. "The Economics of Terrorism and Counter-Terrorism: A Survey (Part II)," Discussion Papers of DIW Berlin 1050, DIW Berlin, German Institute for Economic Research.
    7. Eric D. Gould & Esteban F. Klor, 2010. "Does Terrorism Work?," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1459-1510.
    8. Ivandic, Ria & Kirchmaier, Tom & Machin, Stephen, 2019. "Jihadi Attacks, Media and Local Hate Crime," CEPR Discussion Papers 13743, C.E.P.R. Discussion Papers.
    9. Macera, Rosario, 2014. "Dynamic beliefs," Games and Economic Behavior, Elsevier, vol. 87(C), pages 1-18.
    10. Manudeep Bhuller & Tarjei Havnes & Edwin Leuven & Magne Mogstad, 2013. "Broadband Internet: An Information Superhighway to Sex Crime?," Review of Economic Studies, Oxford University Press, vol. 80(4), pages 1237-1266.
    11. Bracha, Anat & Brown, Donald J., 2012. "Affective decision making: A theory of optimism bias," Games and Economic Behavior, Elsevier, vol. 75(1), pages 67-80.
    12. Jaeger, David A. & Klor, Esteban F. & Miaari, Sami H. & Paserman, M. Daniele, 2012. "The struggle for Palestinian hearts and minds: Violence and public opinion in the Second Intifada," Journal of Public Economics, Elsevier, vol. 96(3), pages 354-368.
    13. Anat Bracha & Donald J. Brown, 2007. "Affective Decision Making: A Behavioral Theory of Choice," Cowles Foundation Discussion Papers 1633R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2009.
    14. Anat Bracha & Donald J. Brown, 2008. "Affective Decision Making and the Ellsberg Paradox," Cowles Foundation Discussion Papers 1667, Cowles Foundation for Research in Economics, Yale University.
    15. Mireille Jacobson & Heather Royer, 2011. "Aftershocks: The Impact of Clinic Violence on Abortion Services," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 189-223, January.
    16. Benmelech, Efraim & Berrebi, Claude & Klor, Esteban F, 2010. "Economic Conditions and the Quality of Suicide Terrorism," CEPR Discussion Papers 7995, C.E.P.R. Discussion Papers.
    17. Elster, Yael, 2019. "Rockets and votes," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 767-784.
    18. Caruso, Raul & Schneider, Friedrich, 2013. "Brutality of Jihadist terrorism. A contest theory perspective and empirical evidence in the period 2002–2010," Journal of Policy Modeling, Elsevier, vol. 35(5), pages 685-696.
    19. Roland Hodler & Dominic Rohner, 2012. "Electoral terms and terrorism," Public Choice, Springer, vol. 150(1), pages 181-193, January.
    20. Levan Elbakidze & Yanhong Jin, 2012. "Victim Countries of Transnational Terrorism: An Empirical Characteristics Analysis," Risk Analysis, John Wiley & Sons, vol. 32(12), pages 2152-2165, December.

    More about this item

    Keywords

    Economics; psychology; education;
    All these keywords.

    JEL classification:

    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • Z10 - Other Special Topics - - Cultural Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp1079. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://cep.lse.ac.uk/_new/publications/discussion-papers/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://cep.lse.ac.uk/_new/publications/discussion-papers/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.