Estimating the Total Economic Impacts of a Terrorist Attack

Summary: Estimating the Total Economic Impacts of a Terrorist Attack
Name: Xueqi Li

In the paper Rose (2009), highlights the use of the economic consequence estimation framework to evaluate the consequences of terrorist attack and natural disasters. Similar to other approaches, using the benefit-cost analysis, the proposed approach emphasizes the losses associated with the attack, but also considers the effect of resilience. There are other factors that affect the consequences, including mitigation effects, macroeconomic interactions, the behavioral linkages as well as remediation. As the paper highlights the case of Economic Consequence Analysis, this model captures the major elements of cost estimations for terrorist related activities and the natural disasters.
The case of integrating resilience in the economic consequence analysis is that it is associated with adaptive adjustments including the conservation of inputs when there is quick recovery and functioning. The traditional loss estimation models are inadequate to estimate the effects of terrorist activities since they fail to account for extended linkages and resilience. Integrating more variables that can be measured can provide a more accurate picture of loss estimation. Typical resilience is high after attacks, but so are the fears surrounding further attacks and government officials are more proactive in such instances. Resilience extended to the activities undertaken to mitigate the effects of the initial shock and seek to hasten recovery.
Estimation of disruption analysis considering the effect of reliance highlights the ability of the administrators and policy makers to restore the situation. This extends to reduce the potential losses associated with the terrorist act including, relocating the resilience tactic. Using the resources efficiently demonstrates the ability of the system to meet the challenges associated with the disaster or terrorist attack. The economic consequence analysis framework further highlights the specific economic impacts where the entity is able to recover from the severe shock. The assumption that there is system stability is based on the notion that there is resilience such that the entity affected by the terrorist activity or natural disaster can bounce back. The worst case scenario is established to evaluate changes and whether there is attainment.
Since immediate effects of terrorism are economic loss, the paper looks into ways through which to best estimate the losses. One of the approaches is recogniz...