9/11 Economic Factors
The households (or consumers), the private sector (or producers), and the public sector (or the government) depending on their involvement in a terrorist attack, economic agents may suffer from (i) direct impacts through losses in physical and human capital, and (ii) indirect impacts that emerge as consequence of the distortion of the economy. First-hand economic damages of terrorist activities have attained recent dimensions in consideration of the unprecedented magnitude of 9/11. Therefore, it is not surprising that the core of the literature focuses on this event as a special case. The destruction that took place includes physical and human losses which by far exceed the average scale of terrorist attacks: Human losses amounted to over 3,000 lives lost (including office workers, aircraft passengers and hundreds of rescue personnel), excluding the unaccounted number of people who suffered temporary and permanent injury, who experienced health problems caused by air pollution from the collapse of the buildings, not to mention the severe trauma and psychological impacts on these victims and their families.
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In general, the estimations of human and capital costs of 9/11 range between US$ 25 and 60 billion.
Navarro and Spence (2001) estimate that human capital losses alone account for US$ 40 billion while property losses ranged “only” between US$ 10 and 13 billion.
Yet, 9/11 is certainly an outlier with regard to the physical damage and human fatalities it caused, compared, e.g., to the majority of predominately separatist terrorist attacks that have been experienced in Europe. Apart from its scale, two other key differences between 9/11 and “conventional” terror attacks prevail: firstly, recent transnational terror attacks can be characterized as large scale but single events, whereas, e.g., terrorist attacks in Europe can mostly be characterized as small scale but more
frequent;
REDUCING PRODUCTIVITY BECAUSE OF SECURITY MEASURES ***
In a phenomenal article for this British issue of Terrorism, Dr. Frank Gregory of Southampton University gives a concise assessment of the way British police have adapted their organization, methods, and training to deal with the challenge of terrorism. The possible alternative of security measures of companies are very similar to households: investment in security equipment and technologies, and management decisions to hedge against the risk of a terrorist attack, reflected e.g. in investment decisions. In ideology, companies that encounter candid threats from terrorism have to set up expenses for security technology, insurance cover and often have to pay a risk premium to their employees in the form of higher wages and salaries; actual quantities depend on the nature of the threat and the respective sector. The limited concern about terrorism is not surprising, given that only specific sectors are likely to face a direct threat, and given that indirect terrorist threats work through other channels, i.e. changes in demand, disruption in supply chains and other operation risks. In other words, terrorism is likely to be addressed within other risk factors.
In general, the estimations of human and capital costs of 9/11 range between US$ 25 and 60 billion.
Navarro and Spence (2001) estimate that human capital losses alone account for US$ 40 billion while property losses ranged “only” between US$ 10 and 13 billion.
Yet, 9/11 is certainly an outlier with regard to the physical damage and human fatalities it caused, compared, e.g., to the majority of predominately separatist terrorist attacks that have been experienced in Europe. Apart from its scale, two other key differences between 9/11 and “conventional” terror attacks prevail: firstly, recent transnational terror attacks can be characterized as large scale but single events, whereas, e.g., terrorist attacks in Europe can mostly be characterized as small scale but more
frequent;
REDUCING PRODUCTIVITY BECAUSE OF SECURITY MEASURES ***
In a phenomenal article for this British issue of Terrorism, Dr. Frank Gregory of Southampton University gives a concise assessment of the way British police have adapted their organization, methods, and training to deal with the challenge of terrorism. The possible alternative of security measures of companies are very similar to households: investment in security equipment and technologies, and management decisions to hedge against the risk of a terrorist attack, reflected e.g. in investment decisions. In ideology, companies that encounter candid threats from terrorism have to set up expenses for security technology, insurance cover and often have to pay a risk premium to their employees in the form of higher wages and salaries; actual quantities depend on the nature of the threat and the respective sector. The limited concern about terrorism is not surprising, given that only specific sectors are likely to face a direct threat, and given that indirect terrorist threats work through other channels, i.e. changes in demand, disruption in supply chains and other operation risks. In other words, terrorism is likely to be addressed within other risk factors.