What Can Economics Contribute to the Study of Terrorism? - The Power and Limitation of Economics

We assess the potential of economics to contribute to the understanding of terrorism. We argue that the economic approach portraying terrorists and law enforcement agents as rational actors yoked to other disciplines is a source of precise falsifiable causal hypotheses. Theoretical economics rooted in rational choice provides precisely falsifiable hypotheses. This falsifiability makes it easier to focus on identifying causal relationships, which is essential for sound policy advice. Economists have developed a multitude of rigorous tools for causal inference ranging from instrumental variables to machine learning, which are essential in typical situations of terrorism that are beset by endogeneity problems. However, neighboring disciplines are needed to provide a rich contextual analysis that allows the assessment of the external validity of the results rigorously derived by economic analyses. Ultimately, rigorous mathematical analysis is valid only if it can capture reality wholly and simply

Criminology · Economics · Law and economics · Neoclassical economics · Physics · Political economy · Political science · Positive economics · Sociology · Terrorism · Law · Terrorism, Counterterrorism, and Political Violence