Applications to counter-terrorism

Economics is not just about money and markets. It is about decisions. And in this regard, economics is no longer a bastion of rationality, holding out against the odds. Rather, it has built and continues to build a set of explanations for human behaviour that draws on a blending of economics and psychology, behavioural economics. The orthodox models, however, continue to hold substantial value as benchmarks and prescriptions for optimal behaviour. There is also a good proportion of people whose behaviour is not far from those prescriptions. When the economics of crime was developed by Becker (1968), Stigler (1970) and Ehrlich (1973), they used expected utility theory and rational choice as their framework. This tradition was followed in criminology and in the economic analysis of terrorism. Modern work can draw on these traditional models and so many more tools that have been developed since. In this book, we present explanations for patterns of terrorist behaviour that we call ‘pattern predictions’. We also present pattern predictions for

law enforcement and counter-terrorism agencies. This is what we can say about

behaviour in the counter-terrorism context:

  • 1. Terrorists don’t fall for it lock, stock and barrel. At times during the 1960s and 1970s in America, a plane was hijacked every six days (Hughes 2019). After metal detectors, air marshals and harsher prison sentences were put in place, the number of hijackings plummeted. But not because hijackers were caught but because they decided not to fry! We can explain this pattern of behaviour, which is quite common among terrorists, including in their choices involving embassy attacks, using the basic economics of consumer theory.
  • 2. Terrorists are terrorists, bombers bomb. Terrorists form a terrorist identity. This has been explored by terrorism researchers who try to explain why people become terrorists. We can explain why they don’t want to stop, either terrorism or a particular type of attack methodology'. Loss aversion combined with potential identity loss makes terrorists less responsive to changes in incentives. Even when the costs go way up, they will persist.
  • 3. Copycat terrorists take more risk chasing successful idols (or rivals). We can use prospect theory' and make the reference point the trigger for a copy'cat or emulation process. Here, the predecessor or rival’s outcomes determine the reference point. Depending on how ‘easy’ it will be given the available attack methods to surpass the reference point, the terrorist finds himself either in the domain of gains or the domain of losses. If the idol or rival has set a ‘difficult’ benchmark, the terrorist is in the domain of losses and is compelled to take more risk.
  • 4. Terrorists are good, but potentially naive, portfolio managers. Terrorist groups and even some individuals combine attack methods in ‘portfolios’. By doing so, even naively, they reap benefits in terms of increased expected pay'offs and lower risks. Terrorist groups are already pushing bey'ond the boundaries of the risk-reward trade-offs that are apparent to law enforcement agencies who consider only one attack method at a time rather than combinations.
  • 5. Terrorist groups survive on relative shares, not absolutes. Whatever ‘payoffs’ we consider, whether it’s inflicted fatalities, media attention, grassroots support or political influence, a terrorist group’s survival is dependent on how well it vies for absolute dominance. Does a plant have to grow to its maximum height to survive? No, it only needs to shade out its nearest competitors. The decision processes that terrorist groups apply to shade out their competition lead to patterns of behaviour that emerge from evolutionary game theory.
  • 6. Some terrorist groups are overconfident and this leads them to do too much terrorism. Overconfidence has been found everywhere that researchers have looked. Overconfidence leads to more risk-taking. For terrorists, it leads to patterns of behaviour characterised by too much terrorism. Too much terrorism is terrorist activity, bey'ond some point, that actually reduces the terrorist’s pay'offs. (a) Women terrorists are less overconfident than men are and this can make them

deadlier. In all contexts, even highly competitive ones, women are less overconfident than men. Whereas overconfidence leads men into too much risky activity, less overconfidence leads women to be more circumspect. Women terrorists engage in terrorism less frequently but this might help them to generate higher average fatalities per attack than men.

  • 7. Carlos the Jackal’s preferences can be measured. Decision theory, including economics and behavioural economics, are frameworks that can be used by law enforcement. Terrorists’ preferences for different attack methods can be measured using either expected utility theory or prospect theory. By inputting different starting conditions, we can get a good idea about where different attack methods (and combinations) sit relative to each other in terms of terrorist preferences. This helps turn a chaotic decision context into a more structured decision context.
  • 8. Law enforcement agencies’ reference points shape terrorism watch lists and suspect prioritisation. Terrorists are not the only ones with reference points. Law enforcement agents and counter-terrorism agents also have reference points. In fact, they might have more than one reference point influencing their decisions at the same time. The influence of‘dual’ reference points produces systematic errors in terrorism watch lists and suspect prioritisation. This pattern of behaviour can be overcome only by carefully unravelling its nature and causes.
  • 9. Heuristics and biases undermine the discovery and application of ideas. At the elite level, in business and within the intelligence and law enforcement communities, people are tasked with keeping an eye on the flow of'academic research’.7 Or with finding solutions that might be in that research. This task is impacted by heuristics and biases, leading to patterns of search that might cause the best solution to be missed. Fortunately, these negative patterns can be avoided by using our knowledge of behavioural economics and decision theory to formulate better searches and better research engagement.
  • 10. Poor decisions from one law enforcement team or agency can precipitate an information cascade. Information theory and economics have a close relationship. A cascade can start as soon as person number three enters in a decision series. If one investigator prioritises a suspect incorrectly based on some particular characteristic, this error can cascade through the team, the agency and across other agencies.
  • 11. Counter-terrorism decision-making is impacted by decision-making biases every second of every day. Terrorism studies and economic analysis of terrorism might focus a little too much on rare events, such as hostage situations or hijackings, where reputations are publicly made and lost. For example, for tactical and negotiation teams, a terrorist hostage taking or barricade situation is not‘everyday’. Rather, it is a highly visible event, which handled well creates heroes and handled badly can end law enforcement careers (Vecchi 2002, p.2).This overlooks the everyday of policing and counter-terrorism. The daily grind, though usually mundane, is shaped continuously by decision-processing factors, including probability judgements. This extends to more innovative practices such as predictive policing.

On April 27,1924, shortly after 2 o’clock in the afternoon, Alexander Alekhine walked into the Japanese room at the Hotel Almanac in New York City and proceeded to play 26 simultaneous games of chess across 12 hours without ever seeing a chessboard.The players were in rows behind him. He sat, smoking cigarettes, at the far end of the room looking out onto 71st Street (American Chess Bulletin 1924). On the basis of the announcements by the ‘readers’ about the other players’ moves, Alekhine visualised the games and stated his own moves. While playing, Alekhine was creating images in his mind’s eye based on the information he was receiving. These patterns and images are formed into chunks of information that elicit possible moves and sequences of moves (Campitelli & Gobet 2005, pp.27-28). Pattern recognition is something that all decision-makers use, not just chess players (Gobet & Simon 1996a, 1996b, 1998; Chabris & Hearst 2003; also see Kahneman & Klein 2009 and Dror & Cole 2010). Even though he could not see the boards or the pieces, Alekhine had more information in the Japanese room at the Hotel Almanac almost a century ago than any counter-terrorism unit has on a given day. In the terrorism context, there is no set playing surface and no set of rules and no finite set of moves.

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