Published on 1/4/2014.

Beirut was recently struck by yet another suicide attack, killing four people and injuring about 77. This attack marks the fourth attack Lebanon has suffered in 2013. This is tragic and unsettling. The progression of violence in the Middle East is alarming, and the issue of security must be addressed in the face of overwhelming spread of radical thought in the region. My thoughts and prayers go out to all victims of terrorist activities.

The topic of terrorist attacks, the causes, consequences, and methods to stop such acts have been overly analyzed across the political spectrum. In this post, I will attempt to shed some light behind the economics of terrorist activities in order to give yet another insight to understanding the behavior of terrorists. I’ll focus on the case of suicide bombers given the recent incident in Lebanon that provided the impetus of this post.

The first ‘point of attack’ to analyze this issue is to consider the recruitment of terrorists. One of my favorite professors at college kept on saying that “there are a supply of and demand for anything that you can think of”. Therefore, the recruitment of terrorists can only result from organizations seeking out to recruit suicide bombers (i.e. the demand side) from a pool of people willing to become suicide bombers (i.e. the supply side).

As it is the case for any market, some money has to be offered in order to recruit people into becoming suicide bombers. After all, suicide bombing is technically a job (with a terrible job-termination plan) and jobs require pay to get people to do them. The first term I’ll be explaining here is the idea of a Reservation Wage.

The reservation wage is defined to be the lowest wage at which a worker would be willing to accept a certain type of job. For example, if someone offered you $10 per day to clean the streets, you would probably reject that offer. But what if someone offered you $1,000 per day? I’m sure all of us will say yes (save for Bill Gates and Jordanian Politicians). The reservation wage here is the wage between $10 per day and $1000 per day at which you’ll be willing to clean the streets, but not for a dollar less than that. For the Jordanians reading this, think of how it relates to the culture of shame that Jordan has.

The reservation wage typically depends on the best alternative for the job you’re being offered to do. If you are currently employed, you’ll probably have a higher reservation wage for cleaning the streets (and thereby quitting your job – forfeiting all income from it) compared to an unemployed person (who has no income). So with that idea in mind, let’s talk about the reservation wage for potential suicide bombers. To stimulate the idea behind it, think of the number of people willing to become suicide bombers in rich countries such as Norway and Sweden vs. the number of people willing to become suicide bombers in impoverished countries such as Afghanistan or Pakistan. You can definitely agree that the number of people willing to become suicide bombers in Afghanistan is higher that the number of people in Norway.

Why is that? Well simply put, people in rich countries have economic opportunities (good education, strong job market, low unemployment, etc…) while people in poor countries do not have such opportunities. A terrorist organization would potentially recruit a number of suicide bombers for $1,000 in poor countries, but fail to recruit a single one in rich countries. The idea is simple, people living in poor economic conditions have a lower reservation wage compared to people in better economic conditions. For an excellent and in-depth economic analysis of this issue, see this paper or this one.

Let’s dive deeper into our analysis (my second ‘point of attack’); searching for data on salaries for suicide bombers was futile. I was led by Google to a statement by Donald Rumsfeld in 2002 saying that suicide bombers earn anywhere from $10,000 to $25,000 to be paid to the bombers’ families. Let’s say the wage was $15,000 in 2002. Adjusted for inflation (assuming 10% per year), this would amount to about $40,000 in 2013. Now let’s consider the decision of a single suicide bomber, let’s call him Joe. Joe was offered $40,000 by a radical idiot in order to blow himself up and cause harm to others. Let’s say Joe said yes. What caused him to do so?

As I’ve stressed in my previous posts, almost any decision can be boiled down to a simple cost vs. (perceived) benefit analysis. If Joe (he’s 30 years old) accepted the offer to become a suicide bomber, then it must imply that in his mind, the benefit of killing himself is larger than the cost of it. So let’s explore what items could be listed under each. Looking at cost first, we can assert that it entails foregone economic benefit from living out the remainder of his life (economic benefit such as having kids, getting a job, etc…) and the cost of ending his life.

What about benefit? I mean, what benefit can be realized from becoming a suicide bomber? Well, the money paid to the family is one component (estimate of $40,000). Esteem, honor, recognition among fellow idiotic terrorists is another. Some economists even went out on a limb to state that suicide bombers derive happiness in killing people (I mean, that’s not hard to believe, it is the same underlying analysis a serial killer’s behavior).

Let’s bring the two together. If Joe came from a poor country, then foregone economic benefit is probably little (no prospect for jobs) and therefore he’ll be willing to become a suicide bomber in exchange for some money paid to his family, and “honor” among his fellow terrorists by killing people because he perceives little value to his life moving forward.

Of course, this framework can suggest possible solutions to combat terrorist, especially economic ones. It’s simple, to eliminate the “terrorist market” you can either eliminate demand (eliminating terrorist organizations like Al-Qaeda, similar to the “War on Terrorism” by G.W. Bush which proved unfruitful) or you can eliminate supply. The latter can be done by improving the economic conditions in poor countries that harbor terrorist organizations. This increases an individual’s reservation wage for becoming a suicide bomber thereby decreasing the number of people willing to do it. Providing education and a sustainable future for potential terrorists is paramount in order to thwart them from becoming one.