I527-290 ESRIF Final Report (WEB).indd - European Commission

3. Terrorism and counter-terrorist measures are often analysed in isolation in the literature, although this form of insecurity
represents only one element in a larger “portfolio of risks” that includes other factors of insecurity, such as organised crime
and mass violent confl icts. Further, there are several indications of substantial conceptual and practical overlaps between
diverse threats to security that should be analysed within an integrated framework of the “human drivers of insecurity”.
4. The available empirical literature in economics focuses largely on the macro-economic outcomes rather than understanding
the underlying processes that lead to these impacts. Particularly little is known about the structure and behaviour of terror
organisations, with the consequence that only limited conclusions can be drawn about the impacts and eff ectiveness of
security measures to reduce terrorism.
5. The security economics literature focuses on the negative impacts caused by perpetrators but rather neglects impacts
resulting from responses to terrorism. As the literature survey shows, economic impacts of terrorist events are transient in
large economies but can be extended due to security reactions of targeted agents. Yet, no detailed research is available that
studies the actual responses of economic agents to terrorism. Related to this, no aggregate analysis exists that studies the
macro-economic consequences of security measures on economies.
6. Last but not least, little economic research concerns the explicit analysis of policy processes and institutions concerned
with terrorism and counter-terrorism.
11.2.4.3 Recommended actions: research needs and priorities
Understanding the rationale and behaviour of actors is the main challenge of the economics of security. This includes:
1. The creation of a critical mass of research and policy advice capacity in Europe requires the establishment of a European
Centre of Security Economics. This centre would allow security economists to communicate and cooperate and to enhance
the visibility of economics and economists in security policy-making. Such a step could contribute towards establishing
and maintaining a minimum critical mass of European research capacity in the fi eld of security economics. This centre could
also complement the national support for research on economic aspects of security.
2. The economics of terrorism and development: Even though this area has been researched in relative more detail, the analysis
should be extended to cover three further fi elds. First, a wider range of developing countries, particularly in countries where
terrorist activities have been more frequent, should be included. Second, while knowledge exists on the impacts of terror
attacks on the economy under attack, no information is available on the economic repercussions of underlying terror
activities in host countries. Third, this should also include analysis of the symbiosis of terror organisations and fragile states.
3. The micro-economics of the fear of terrorism: This area should demonstrate, through the applied economic analysis
of individual and household data, as well as experimental economic approaches, how the perceptions and the fear of
terrorism shape human behaviour and well-being in areas such as consumption, saving, investment, and labour market
decisions. Furthermore, data on the attributes of radicalising individuals should be collected from security organisations
and combined with offi cial statistical sources. Still other possibilities include comparing the fear of terrorism to other moodrelated
variables like happiness or life satisfaction.
4. The economic impacts of security measures: This area of research should focus on the quantification of costs and
benefits across-time derived from security measures. Cost calculations should address the societal effort related with
the implementation of security measures in terms of investment required. Nevertheless potential large detrimental
effects on the economy are sometimes easily overlooked such as increased frictional costs, decreased efficiency,
transboundary impacts (e g externalities) and citizen dissatisfaction. Benefits shall consider the increase of welfare and
wealth associated with the achievement of a safer society. Further research is also needed to cover the considerable
knowledge gaps existing about the degree of success of the organising mechanism to satisfy society’s wants in
security i.e. the European industrial security market structure and its economic performance – in other words,
additional progress is needed in the analysis of the interactions between security behaviour and societal economic
growth across time.
239