“Terrorism is a major negative externality” is something only an economist would write. So begins a recent paper by economists at the University of York and Imperial College London, who have been studying the impact of 9/11 on well-being in the UK.
A negative externality exists where party A is affected by the actions of party B but is not compensated for party B’s actions. A common example is a noise from the neighbour upstairs, or pollution caused by a factory up the river. So to say that terrorism is a major negative externality is an under-statement to the point of being rather funny. (If of course we have reached that point in time where it is officially decreed that quips tenuously related to 9/11 may be funny. I suspect we haven’t reached that time yet. SO IT IS NOT FUNNY. But they’ll have a chuckle in a couple of generations).
Just hearing about and seeing the effects of terrorism in the news perhaps, unsurprisingly, decreased survey measures of UK households’ well-being. Which perhaps suggests that a key contributing factor here is ubiquitous and sensationalist news coverage, which undoubtedly helped spread the fear and terror. The existence of this news coverage increases the impact of terrorism: if you’re a terrorist, it’s somewhat infuriating if you go to all the trouble of blowing up a building or two if nobody notices. On the other hand when it’s immediately beamed around the world it must be quite gratifying from a terrorist’s point of view, not to mention rather cost-effective in terms of spreading the terror. So might the ubiquity of information be increasing the risk of terrorist attacks? Should we limit the amount of gory detail on our TV screens, just as we have policies not to deal with hostage-takers?
Anyway I digress. Back to the findings of the paper: in the UK, the effect of 9/11 on people was worse than getting divorced, but not quite as bad as becoming unemployed or being widowed. So they’re not winning just yet…
The full paper is here: http://www.york.ac.uk/depts/econ/documents/dp/0910.pdf