Most anti-terrorist spending is wasteful, claims a new study.
AFTER September 11th 2001, most countries beefed up security at airports and other vulnerable places. Tough-looking immigration officials no doubt made passengers feel safer, offsetting the irritation of longer queues. Yet doing something because it makes people feel good is not adequate justification. Is money devoted to counter-terrorism well spent?
What claims to be the first serious study of its costs and benefits, by economists at the Universities of Texas at Dallas and Alabama*, says no. It was commissioned by the Copenhagen Consensus, a think-tank that aims to scrutinise public spending on the world's woes and to ask “should we be starting from here?”
The authors of the study calculate that worldwide spending on homeland security has risen since 2001 by between $65 billion (if security is narrowly defined) and over $200 billion a year (if one includes the Iraq and Afghan wars). But in either case the benefits are far smaller.
Terrorism, the authors say, has a comparatively small impact on economic activity, reducing GDP in affected countries by perhaps $17 billion in 2005. So although the number of terrorist attacks has fallen, and fewer people have been injured, the imputed economic benefits are limited—just a tenth of the costs.
That does not necessarily mean the extra spending was wasted. The number of attacks might have been even higher. In 2007 Britain's prime minister, Gordon Brown, said his country had disrupted 15 al-Qaeda plots since 2001. Yet so big is counter-terrorism spending and so limited is terrorism's economic impact that, even if 30 attacks like the London bombings of July 2005 were prevented each year, the benefits would still be lower than the costs. The authors conclude that spending is high because it is an insurance policy against a truly devastating operation such as a dirty bomb; and because, since terrorism is global, if one country improves security, so must others.
Terrorists react to incentives. If you tighten airport security, they hit trains. If you improve security at embassies, they kidnap businessmen. If you disrupt routine operations, they try deadlier ones. The authors reckon that, though the number of attacks and injuries has fallen since 2001, deaths have risen. Anti-terrorist spending displaces, as well as reduces, terrorism.
To get a sense of what might work better, the authors ask what would happen if spending were raised by 25%. Not much, they think: spending is inefficient now and would remain so. To see what might happen if there were more vigorous military action, they extrapolate from 2002-03, when America's belligerent response to September 11th was beginning. There were fewer terrorist attacks, they say, but the balance of costs and benefits is still poor—between five and eight cents of benefit for every dollar spent. But international co-operation to disrupt terrorist finances would be cost-effective, they think, producing $5-15 of benefits for each $1.
Given the uncertainties of the calculations, such figures can hardly be a blueprint for radically reordering spending priorities. But they are a reminder that throwing money at terrorism works no better than throwing money at anything else, and that some kinds of anti-terrorist spending are more efficient than others.