The Economics of Terrorism

My AFR op-ed today is on the economics of terrorism, discussing a new book by Eli Berman. He’s not the first empirical social scientist to tackle the topic (Robert Pape and Alan Krueger both have extensive treatments of the topic), but I think Berman’s analysis is the most insightful to date. Full text over the fold.


What Makes Martyrs Tick, Australian Financial Review, 19 January 2010

In a Pew poll last year, Muslims in various countries were asked whether suicide bombing against civilian targets is sometimes justified in defence of Islam. Yes, said 68 percent of Palestinians, 15 percent of Egyptians, 13 percent of Indonesians, and 5 percent of Pakistanis.

These figures highlight an intriguing puzzle. Why were hardly any lives lost to suicide bombing in the 1970s, but over 10,000 in the 2000s? What makes suicide bombing so popular in the modern age?

Most people find it impossible to answer this question without using the word ‘crazy’. But a fascinating strand of research has begun to use the tools of economics to try and better understand what drives suicide attacks, and how we might stop them in the future.

In his new book, Radical, Religious and Violent: The New Economics of Terrorism, economist Eli Berman (University of California, San Diego) takes a cold-blooded look at one of the hottest policy questions today.

He begins by popping a few myths. Interviews with families and friends of suicide bombers, as well as with failed bombers, show that they are not particularly motivated by the afterlife, but by concerns closer to home. This is consistent with the fact that the worst barrage of suicide attacks in the twentieth century were carried out by the nominally atheistic Tamil Tigers. It’s time to stop pinning all suicide attacks on those 72 virgins.

Careful studies of suicide bombers suggest that they are not generally depressed or mentally ill, and would not be the kinds of people who would otherwise kill themselves. Rather than regard suicide bombers as mad zealots, Berman argues, we should think of suicide bombers as misguided altruists, who truly believe that their acts will bring great benefits to their community.

To understand why suicide bombing has become more common, Berman contends, we need to stop focusing only on the motivations of bombers, and consider the ‘hardness’ of their target. As it becomes more difficult for terrorists to do damage, they are more likely to switch to suicide bombing. Developed nations ‘have sent well-armed, well-equipped forces into battle against low-technology insurgents’. Faced with no other option, ‘rebels counter with suicide attacks’. Thus the rise in suicide bombings over the past quarter-century has a lot to do with the improvements in the military capability deployed against them. We send armoured personnel carriers; terrorists respond by driving car bombs into police stations.

What can we do to reduce the number of terrorist attacks in the future? One approach is to limit the amount of money reaching insurgent groups. Since some of this comes from the export of hard drugs and petroleum, it is straightforward to see how drug legalisation and a climate change deal would represent a pay cut for terrorist groups.

But Berman’s main focus is the relationship between terrorism and social service provision. It is no accident, he says, that the Taliban run law courts, Hezbollah collects garbage, and Hamas operates health clinics. Social services provide a way of harvesting new recruits, and testing their commitment to the leadership. And because they can be withdrawn at will, social service provision gives leverage over the local population, reducing the chance that an informant will leak the latest plan.

To really shut down terrorist groups, Berman argues, we need to undermine their social service provision. He gives the historical example of Egypt’s President Nasser, who undermined the Muslim Brotherhood by nationalising their network of schools and clinics in the 1950s. By directly providing electricity, healthcare and welfare services, governments improve the outside options for young people. Using soldiers to protect an NGO who is opening a new school is unglamorous work, but it may be the best way of crippling insurgents. (Insurgents know this, of course, which is why aid projects have been targeted so often in Iraq and Afghanistan.)

In the past, researchers such as Princeton University’s Alan Krueger have pointed out that the typical suicide bomber is better-educated than other members of their group. If suicide bombers are well-schooled, the argument goes, antipoverty programs won’t reduce terrorism.

Yet by looking at groups rather than just individuals, Berman’s book shows why the two are intertwined. Like Australian military expert David Kilcullen (who calls counterinsurgency ‘armed social work’), Berman argues that ‘social service provision creates the institutional base for most of the dangerous radical religious rebels’. Demolish that base, and you begin to unravel the organisation.

Unusually for a book about terrorism, Berman keeps it in perspective. Global terrorism is not the greatest threat to the world. Adam Smith’s combination of markets, religious pluralism and tolerance are a winning combination. The more we can help poor governments provide basic services to their citizens, the less space we allow for radical rebels to fill the void.

Andrew Leigh is an economist in the Research School of Economics at the Australian National University.

Unlike the NYT, the AFR doesn’t let authors put graphics in op-eds, but here’s what Google has to say about the long-run patterns.

(xposted @

9 thoughts on “The Economics of Terrorism”

  1. Palestine is a particularly interesting example – Hamas (and I could be wrong on this) started out as a provider of social services and then migrated into conducting terrorist attacks.

    There is no real state provision of services in Gaza. Israel seems to have effectively and systematically prevented the emergence of a strong and stable state apparatus in Gaza.


  2. Marc Sagemen is also a good read – and makes the same points about terrorists being mostly well-educated and driven by misplaced moral outrage.

    The policy responses outlined look like the usual economists approach to a social/moral problem: give them some monetary incentive/disincentive. Coupled with simplistic “solutions” that owe more to theory than any practical possibility, such as drug legalisation (and terrorism is cheap – less oil or drug money is unlikely to affect it).

    Why not check on whether we want to give them some of what they want? That is, a Palestinian state that is not a facade for continued Israeli exploitation, or a more even-handed approach to issues involving Muslims? The Tube bombers were not deprived of social services, nor the Australians convicted of planning, nor the volunteers from wealthy Arab states who make up many of the suicide bombers in Iraq and Afghanistan.


  3. The really interesting question this asks is that if social services etc were increased and improved in Gaza and the West Bank would this stop suicide bombers?
    One view is that the lines are drawn on religious ownership of Jeruslaem and, therefore, improvement in social services cannot stop a battle of beliefs.
    This seems to implicitly state that with improvement in social services less people would become suicide bombers… but would that mean an end to the conflict? Would it reduce the violence?
    Personally, I have no idea (and I’ve read David Kilcullen’s book).


  4. It’s a very interesting idea. It may explain middle-class suicide bombers and jihadis from Saudi Arabia, Nigeria, UK, and even Australia? (Thinking of recent examples.) Ancedotely, they seem to find their fundamentalist views/belief systems later in life.

    What I don’t see is the link between their lives and the lives actually lived in the places mentioned. I was also perplexed by the stated difference in opinion over suicide bombings between Palestinians and Pakistanis in the stated context of government services and perceived fundamentalist groupings and suicide bombings in those nations.


  5. There was a VoxEU post a while back on the economics of political assassination by Bruno Frey, Professor of Economics at the University of Zurich. Putting the argument for social services from the book you mention together with the difference between social/individual cost of protection of senior politicians from the VoxEU post would create a chain of logic unwelcome in some quarters.
    The teaser is “ Economic logic suggests that politicians are overprotected and therefore too isolated from citizens; the social cost of a political assassination is much lower than its private cost to the politicians, and the private cost of protection is lower than the social cost. Moreover, authoritarian rulers are more overprotected and isolated than democratic politicians since assassinating them has more impact on policy.”


  6. Hmmm…the fact that all those suicide videos are surrounded by Green flags, copy of The Koran, and rather than “cheerio”, end that video with <i>Allah Akbar</i> pales into insignificance compared to a fourth hand sound-bite from Edward Said?
    Back to the drawing board.


  7. Benson,

    That’s all paraphenalia to identify with their colleagues. Could be a redneck draped in a Confederate flag babbling pseudo-philosophy about Darwin’s “survival of the fittest”. Somebody already made the comment about moral outrage. Probably should include tribalism as well.


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