The Political Economy of Terrorism: A Selective Overview of Recent Work

While a small political economy literature on terrorism and counterterrorism dates back over two decades, there has been an explosion of such research since the attacks of September 11, 2001. This literature has attacked critical questions about terrorism and its consequences—including the structural determinants of terrorism, who becomes a terrorist, optimal counterterrorism policy, terrorism and radical mobilization, government-terrorist negotiations, and the internal politics of terrorist organizations (among others)—in a variety of creative ways. This work, by economists and political scientists alike, offers important new insights into how terrorism works and the issues governments face in trying to protect themselves from political violence. In this brief essay, I provide a selective (and somewhat idiosyncratic) overview of the recent political economy literature on terrorism, focusing almost exclusively on articles written in the last decade. It is worth noting, at the outset, that my use of political economy here is at once both fairly broad and fairly narrow. It is broad in the sense that I do not focus exclusively on issues that involve both politics and economics—my discussion will not be limited to the interaction of political violence and the economy. It is narrow in the sense that I in fact ignore large parts of the literature on the interactions between terrorism and the economy. Instead I adopt, for lack of a better term, a 'methodological' interpretation of political economy, focusing my discussion on scholarship that addresses questions related to terrorism using either formal models or quantitative empirics. This should not be viewed as a judgement regarding the merits of these literatures relative to others, but rather as an accommodation to my comparative advantage (such as it is) in writing such a review. The essay is organized around several large themes that I take to be critical to understanding the politics of terrorism. In each section I attempt to provide the reader with a sense of the questions that have motivated research and to summarize some of the best work on the topic. My hope is that, in so doing, I will alert readers to open research questions and thereby spur others to contribute to the research agenda.