Terrorism and Economics

What is your reaction when you see the continued news stories surrounding the Paris terrorist attacks? Brussels today, for the third day in a row, is on lock down – army everywhere, most things shut down, people being told not to congregate in groups.

Your response, hopefully, is not necessarily with the economic impact of all of this – there’s a human impact first of all, and hopefully the very strong measures being taken in Belgium will have had the impact of saving some innocent lives.

In light of the Paris attacks, much commentary has been written; not least: why do we care more about Paris than Beirut? Here’s a piece written last week on the potential economic impact: the stock market effect was muted, but it may be that in the longer term we notice effects more in terms of economic efficiency in Europe – much production relies on cross-border transport links, which are being disrupted this year firstly via the refugee crisis, and now from the increased level of terror alerts across the continent.

Places like Egypt and Tunisia have undoubtedly suffered differently in the longer term after terrorist atrocities, via lost tourism income. It’s clearly a secondary impact compared to the initial impact of any attack on human life, but an impact nonetheless. Are we generally sufficiently risk averse that terrorist attacks will influence our consumption patterns, even if the likelihood of being caught up in a terrorist attack is incredibly small?