CALCULATING TRAGEDY:ASSESSING THE COSTS OF TERRORISM

The trends and consequences of terrorist activities are often captured bycounting the number of incidents and casualties. More recently, the effects of terroristacts on various aspects of the economy have been analyzed. These costs aresurveyed and put in perspective. As economic consequences are only a part of theoverall costs of terrorism, possible approaches for estimating the utility losses of thepeople affected are discussed. Results using the life satisfaction approach, in whichindividual utility is approximated by self-reported subjective well-being, suggest thatpeople’s utility losses may far exceed the purely economic consequences.