Introduction

In the last seven years, terrorism, its consequences, and how to counteract it, have become a household discussion subject and the object of intense scrutiny by social scientists. This is the direct consequence of the attack of September 11, 2001, in the United States, the shape of the U.S. government's response in a variety of forms labeled the “war on terror,” and the continuing occurrence of extremely violent attacks in various parts of the world. In economics, the literature on terrorism has made remarkable advances since 2001, building on important work that was available. The literature has been strengthened in the range of topics analyzed, as well as the data and methodologies employed. In spite of substantial progress, though, different strands of research remain insufficiently integrated. At this stage, charting the progress made so far and suggesting fruitful avenues for additional effort are key. This chapter puts forward a broad survey of the economic literature on terrorism, organized according to seven different topics. We identify what we think we know, highlight the key issues that remain to be answered and the data that might illuminate this research effort.

Any attempt at organizing existing knowledge on a topic should circumscribe the topic and adopt a definition. Terrorism, given its variety of objectives, methods, targets, and organizational forms, is elusive as far as definitions go. The word “terror,” at least with its ominous sense of persistent and indiscriminate violence, has been traced to the Robespierre years of revolutionary France.