The ecology of terror defense

We draw on an ecological metaphor to analyze terror defense by governments and individuals. Governments can combat terror in part by targeting what we call the "stock of terror capacity" accumulated by a terrorist organization. The optimal control of terror stocks relies on both periodic cleanup and ongoing abatement, a lesson derived from the optimal control of other stocks of public bads, such as pollution. The government�s optimal policy portfolio also includes averting actions (reducing the probability of successful attacks) and amelioration (reducing the harm from an attack). We also consider individual responses to terror threats. Citizens can protect themselves from terror by avoiding exposure to threats and by reducing the harm they suffer if an attack occurs -- actions we call "avoidance" and "amelioration," respectively. Such individual responses may exert a positive or negative externality on nearby individuals, depending on how the likelihood of harm of one person varies with the number of people similarly exposed. A simple model shows how individual responses to collective threats may undermine the effectiveness of government policies to address such threats. Indeed, in the simplest case where individuals are identical, government policies that fall short of complete protection will improve welfare not at all. Our model uncovers a strong analogy between the problem of individual responses to terror and the familiar congestion externality.