What Would Justify America’s Homeland Security?
The Article: 1,667 Times Square-Style Attacks Every Year: That’s how many terrorism plots we would have to foil to justify our current spending on homeland security by John Mueller and Mark G. Stewart of Slate.
The Text: Is it possible to measure the risk of terrorism? Measuring risk can be difficult, but it is done as a matter of course in such highly charged areas as nuclear power plant safety, airplane safety, and environmental protection. There is adequate information about terrorism: There is plenty of data on how much damage terrorists have been able to do over the decades and about how frequently they attack. The insurance industry has a distinct financial imperative to understand terrorism risks to write policies for it. If the private sector can estimate terrorism risks and is willing to risk its own money on the validity of the estimate, why can’t the Department of Homeland Security?
A conventional approach to cost-effectiveness compares the costs of security measures with the benefits as tallied in lives saved and damages averted. The benefit of a security measure is a multiplicative composite of three considerations: the probability of a successful attack, the losses sustained in a successful attack, and the reduction in risk furnished by security measures. This product, the benefit, is then compared to the cost of the security measure instituted to attain the benefit. A security measure is cost-effective when the benefit of the measure outweighs the costs of providing the security measures.
The interaction of these variables can perhaps be seen in an example. Suppose there is a dangerous curve on a road that results in an accident from time to time. To evaluate measures designed to deal with this problem, the analyst would need to estimate 1) the probability of an accident each year under present conditions, 2) the costs of the consequences of the accident (death, injury, property damage), and 3) the degree to which a proposed safety measure lowers the probability of an accident (erecting warning signs) and/or the losses sustained in the accident (erecting a crash barrier). If the benefits of the risk-reduction measures—these three items multiplied together—outweigh their costs, the measures would be deemed cost-effective.
These considerations can be usefully wrinkled around a bit in a procedure known as “break-even analysis” to calculate how many attacks would have to take place to justify a security expenditure.