Prospect theory and homeland security

In the wake of the London transport attacks and calls in the United States for protecting our infrastructure,, it is worth remembering one of the most important results from the work on prospect theory in economics is that human beings overestimate the likelihood of rare events actually occurring. One political implication of this fact is that governments will be asked to overinvest in measures designed to regulate and curb low-risk events. In the wake of the London transport bombings, there has been a lot of chatter on television about what must be done to boost homeland security. However, prospect theory offers an important corrective to this natural response — we exaggerate the cost of terrorist attacks on U.S. soil. Keep this in mind when reading Benjamin Friedman’s article in Foreign Policy on the myths and realities of homeland security. Here’s how it opens:

The odds of dying in a terrorist attack are minuscule. According to the U.S. Centers for Disease Control, the odds are about 1 in 88,000. The odds of dying from falling off a ladder are 1 in 10,010. Even in 2001, automobile crashes killed 15 times more Americans than terrorism. Heart disease, cancer, and strokes are the leading causes of death in the United States?not terrorism. People overestimate risks they can picture and ignore those they cannot. Government warnings and 24?hour news networks make certain dangers, from shark attacks to terrorism, seem more prevalent than they really are. As a result, the United States squanders billions of dollars annually protecting states and locations that face no significant threat of terrorism. In 2003, Tulsa, Oklahoma, received $725,000 in port security funds. More than $4 million in 2005 federal antiterror funding will go to the Northern Mariana Islands. In 2003, Grand Forks County, North Dakota, received $1.5 million in federal funds to purchase trailers equipped to respond to nuclear attacks and more biochemical suits than it has police officers. These small expenses add up. Federal spending on first responders grew from $616 million in 2001 to $3.4 billion in 2005, a 500 percent increase. Homeland security spending will approach $50 billion this year, not including missile defense?roughly equal to estimates of China?s defense spending. Yet pundits call for more. A 2003 Council on Foreign Relations report hyperbolically titled, Emergency Responders: Drastically Underfunded, Dangerously Unprepared, recommmends increasing spending on emergency responders to $25 billion per year. To his credit, the new secretary of homeland security, Michael Chertoff, wants to trim the pork from the department?s budget. But efforts in congress to link funding with risk have failed largely because haphazard spending is consonant with the current U.S. strategy that tells all Americans to be afraid. It?s true that al Qaeda?s attacks on Sept. 11, 2001, may be a harbinger of a more destructive future. But it is also true that parts of the war on terrorism are working. Tighter U.S. entry requirements, more aggressive European policing, the destruction of al Qaeda?s Afghan sanctuary, and refined intelligence operations have crippled al Qaeda?s ability to strike the United States. Most of al Qaeda?s original leadership is dead or in prison. Few other Islamist terrorists?even the most wanted terrorist in Iraq, Abu Musab al?Zarqawi?are as capable or organized as al Qaeda once was…. Most Americans are safe from terrorist attack. And the most likely forms of attack remain conventional. The fact is, all terrorist attempts to use chemical and biological weapons have failed to cause mass casualties. True, a successful biological weapons attack could kill hundreds of thousands of people. But manufacturing, controlling, and successfully dispersing these agents is difficult?probably too difficult for today?s terrorist groups. Synthesizing and handling chemical agents such as the deadly nerve agent VX, sarin, or mustard gas is complicated and extremely dangerous, often requiring access to sophisticated chemical laboratories. Most experts agree, for instance, that al Qaeda does not possess the technical capability necessary to produce VX. And even if terrorists procure and deploy chemical weapons, they are unlikely to kill many people. The 1995 sarin attack in Tokyo?s subway system was limited to only 12 deaths. Official U.S. government reports, including that of the Gilmore Commission, which examines domestic responses to terrorism, show that it would take one ton of chemical agent, favorable weather, and considerable time to kill thousands of people with chemical weapons.

Read the whole thing — and then check out this 2003 primer on “Prospect Theory and its Applications for Disaster and Emergency Management.”