How do we fight crime and more importantly terrorism?

Posted on March 17, 2010 by

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It occurred to me that instead of spending billions of dollars in taxpayers money in Iraq and Afghanistan, we should engage in a war against the underlying forces that make joining a terrorist cause an optimal individual/household decision.  Some argue that there is a correlation between poverty and terrorism but evidence shows that most terrorists are actually highly educated, wealthy (above average) individuals in their country of origin.  It would be interesting to uncover the economic conditions and incentives that have encouraged so many into despicable acts against human life.

I started my research by reading the existing economic literature on crime.  I started with Ehrlich (1973) “Participation in illegitimate activities: theoretical and empirical investigation.”  Ehrlich’s paper incorporates the concepts of opportunities both punishment and rewards, the costs vs the gains from legitimate and illegitimate pursuits.  Ehrlich presents the “offenders” decision problem which results in the optimal allocation of resources under uncertainty to competing activities both inside and outside the market sector.  In Erhlich’s model, individuals are free to combine legal and illegal activities during any period throughout their lifetime (optimal activity mix/ optimal allocation of time).  Erhlich finds that levels of risk aversion of individuals, the severity of the punishment for a crime and “free” time plays an important role in the decision between legitimate and illegitimate activity.  The more “free” time individuals have (high unemployment rate, low school enrollment rate), the more likely they are to engage in illegitimate activity.  Ehrlich also finds that there’s a stong positive correlation between income inequality and crimes against property. 

It would be fair to assume that this economic theory of crime would apply to terrorism.  A study by Blomberg, Hess, Weerapana (2003) “economic conditions and terrorism” shows that for democratic, high income countries, economic contractions lead to increased likelihood of terrorist activities.  They conclude that groups with limited access to opportunity rationally engage in terrorist activities. Terrorism appears to be related to the business cycle.   I’m suspecting that this result probably has a lot of to do with the fact that unemployment is counter-cyclical, and that higher unemployment during a recession would lead to an increase in the likelihood of crime/ terrorist activity. 

… To be continued…

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