Cost Benefit Analysis of Terrorism

I am a big supporter of cost benefit analysis. For those that shy away from any sort of economics or math a few examples are best:

1. You can go to a fine dining resturant and get a burger for $20. You could go to a chain resturant and get a similar burger for $10. Cost benefit would suggest you should go for the $10 burger becuase you save half your money but only sacrifice a bit of quality.

As you can see cost benefit can be very useful when applied to certain situations. For example, I can do no work and get a good grade or I can do 4x as much work and get only a slightly better grade. I will take the less work. Cost benefit analysis can help people make certain decisions.

However, the main problem of cost benefit analysis is that you need to fix a price to something. In applying the rational to anti-terrorism measures we must attach a certain value to a human life. This task is inherently difficult. For example: Say that I could spend $1 million and reduce the risk of a given terroism attack that would kill 20 people by 10%. Is the measure worth it? Mind you, we don't know who those 20 people are. I for one do not want to be one of the 20 so I will approve the spending. However, I also point out that the risk is not completely eliminated only reduced. Let's say another million would reduce the risk another 5%. Would I do it? Most likely.

As the previous paragraph points out this is essentially the mathamatics of fear. We can all agree that terroism is a random event much like being hit by a bus or struck by lightning. However, we can spend money to reduce the risks. How much money? The how much is the question becuase it is impossible to attach value to life. There is even an argument we should spend nothing becuase such spending does not even eliminate the risk.

Although this piece offers no answers, I merely suggest that anti-terrorism measures take an economic toll as well. It is common for government to use cost benefit analysis to decide how much money to spend on certain projects. However, in deciding whether to fund increased anti-terror measures the theory doesn't work as well. The mathamatics of fear is a tough varible. At which point do anti-terror measures produce diminishing returns measured in restricted freedoms, loss of revenue, and lack of spending on other projects? The question is simple, but with hefty implications: How much would you spend to save a life?