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The Political Economy of Terrorism: A Conversation with Anne Bradley · Café Berlin

• speaker-1: Mm-hmm. Welcome to Kaffee Berlin, a podcast brought to you by the National Association of Scholars. I'm Lila Nourakish, Senior Fellow at NAS for International Affairs and Academic Integrity. And this is my co-host, Ian Oxnevad, Senior Fellow for Foreign Affairs and Security Studies. Good day to you, Ian. speaker-2: How are you, Leela? Today's guest is Anne Rathbone Bradley. Anne is a full-time professor at the Institute of World Politics, where she teaches economics to future policy and national security professionals. She is the George Sally Mayer Fellow for Economic Education and the Academic Director at the Fund for American Studies. She's also a visiting professor at Georgetown University. Her scholarship is unique, to say the least. She focuses on the political economy of terrorism, specifically the industrial organization of Al Qaeda, and she is currently writing a book on Al Qaeda after September eleventh. She previously served as the economic analyst at the CIA's Office of Terrorism Analysis. speaker-1: Anne, welcome to the show. Thank you so much for joining us. speaker-0: Thank you so much for having me to both of you. speaker-2: Of course. ⁓ so Anne, you mentioned you you teach economics ⁓ to future foreign policy and national security professionals. Why is economic literacy essential to understanding terrorism, foreign policy, and statecraft? I asked this because in intelligence professionals, policymakers, and national security types, economics almost seems like it's a completely black box is in terms of what they look at, especially with terrorism. It's like economics doesn't even play a factor. speaker-0: Yeah. Yeah, I agree with that. And I think it's a problem. I I actually kind of think this is just a general problem in terms of people maybe not understanding what economists do and therefore not understanding when they should be involved in these types of conversations. ⁓ and so, you know, kind of what we talk about, especially when I'm teaching, like you said, you know, I'm teaching people who are gonna be national security professionals in one way or another. They may be policymakers, they might advise. So they're gonna be doing really important things. And they, you know, it's funny when they come into my class, I wonder if they think, gosh, I just like want to check this box, they're making me take this, but this has nothing to do, you know, with what I want to do. And so we try to transform ⁓ their thinking on that by by showing that, you know, economics as a discipline is about how people make decisions under scarcity, under uncertainty, and that applies to all sorts of things that we don't. Think it does. But in terms of terrorism and and counterterrorism policies, it matters both from the perspective of how we treat terrorists. Do we treat them as rational actors who make choices and who respond to incentives? My argument is that of course we should treat them that way. Because it means that if they do respond to incentives, then for the policymaker, for the intelligence analyst, we for the for somebody in a military command. When we take action, we actually have to think about how it is going to be received, how it may or may not change incentives, because policy can't be effective if it doesn't take that into consideration. And so that's why economics is relevant. It's certainly not the only thing that's relevant. And so I I don't want to overstate the case, but I think you're right. I think people just say this is not an economic issue. Why would we call an economist, you know, kind of when we're trying to think about how to how to stop terrorists in in you know whatever manner we're thinking about. speaker-2: Well, and I I I I I ask this because I remember doing my dissertation when I was writing about terrorist financing a lot. You had I remember looking at original documents that were just being declassified and how Al Qaeda was like, you know, sending memos about how much money they were spending on toilet paper and and and take out and stuff like that. And I'm thinking to myself, this this is such a world away from the way people normally think about terrorism. But you know, terrorists buy toilet paper too. You know, they have receipts and they they they act like organizations at the end of the day that I mean when you take the ideology and the violence out of it, they act like any other business or non profit in terms of their economic behavior. And I remember also in the early two thousands, one of the things that they were trying to do was they were trying to force more of the the terrorists to rely on like illicit drug trafficking so you could arrest more of them more quickly to prevent attacks. But that's a change in incentives. I mean, ⁓ is is there and one I I need to ask this. When we when we talk about especially recently, like the reclassification of certain drug cartels, for example, as terrorists. Yeah, to someone who doesn't know terrorism, that looks like it makes sense because the the tactics are the same. But there's a demand for the things that the drugs are selling, right? Or that the cartels are selling. There's there's an actual economic MO behind those things, as opposed to terrorism. Especially ideological ones, they act more like non profits. Is that is that the accurate assessment? speaker-0: I think that that's fairly accurate, yes. So I I to the first part of your question, I think I'm I'm concerned about this reclassification because I I think that we have to and this was when I was, you know, I I also, like you, did my ⁓ doctoral work on on terrorism and that was in the early days, you know, right after nine eleven. ⁓ and so I I faced the same thing you did. Think documents were becoming declassified. ⁓ I had the benefit of the 9-11 Commission report becoming available while I was doing the research. And that that was very valuable and useful, as you say. You learn about how the people who run terrorist organizations think. And so we'll get to the toilet paper and the budgeting in a moment, but they absolutely do that. And it's not intuitive for us to think like that because we think they're the bad guys. Bad guys do bad guy things, they don't do good guy things like have a budget ⁓ or raise money or have a marketing department. And so I think from the perspective of law enforcement and counter, let's say it's just counter-criminal types of policies, whether it's counter-terrorism or narcotics and drug trafficking and things like this, I think to categorize everything as terrorism is a mistake for a couple of reasons. One is because we have to kind of really mean what we say when we say terrorism, because terrorism tends to elicit a higher willingness of the public to do things to stop them. And so you want it to mean something really specific. And when the State Department talks about terror by the way, I'll say, and you know this, I'm sure, but we have a hard time just in the you know, kind of American bureaucracy as it pertains to combating and fighting terrorism, even agreeing on a definition of terrorism. ⁓ yeah. Right? You know, so this is like really challenging to do. More moreover, like the world doesn't agree either. So you can't really fight something if you have too vague of a definition of what it is. But I think one part of the State Department's definition is this idea that terrorists levy violence against non-combatant targets. Because their job, right, is to use terrorism or to use violence to terrify so that they can achieve these other objectives. So it's not even terrorism for its own sake. It's not like The people who formed Al Qaeda were like, you know, we have nothing better to do. We want to frighten people. But the the terrifying people is is a means to their stated goals. And as you say, I think cartels are doing something very different here. They're not using violence as a mechanism to get, you know, kind of ⁓ against non-combatant targets to get their goals done. So if if a member of a cartel kills, you know, kind of a junior member of the organization who didn't do what they were supposed to do when when trafficking drugs or or whatever, ⁓ they're doing it as a violent punishment for not following through with, you know, kind of w what the organization wants. They're not kind of blowing up buildings for for, you know, kind of the sake of their drug business. So I think you're right. They're maximizing profit and loss. They're acting more like a traditional firm that's selling something ill or moving something that's illegal. So they're operating in a black market. I think terrorist groups operate in a black market. I think they're still subject to the laws of supply and demand. That was really an important part of my work. But I do think they're more acting like a nonprofit in the sense that they're not maximizing profit because they don't sell anything. So they're raising money to execute their attacks and all sorts of other things they do back to the toilet paper, right? If you're gonna house people and feed them and clothe them and train them. You need all these supplies to be able to do that. And so I think the the work of cartels and the work of terrorist organizations is separate. That doesn't mean I don't think we should have policies against both of them. I think they're different things and I think these they're they're categories of difference. speaker-2: I mean to to to jump in because I know that Leela wants to talk about incentives in a moment and and just educating to determine incentives. I think with with cartels, the closest thing that they might be doing to terrorism is when they're actually acting upon each other. And I'm thinking specifically of like narcomantas where they try to intimidate the other cartels because there's no legal contract enforcement. So they actually have to terrify or intimidate the other cartel into staying away from their supply chains and things like that. ⁓ but But with the with the nonprofit aspect too with with terrorism, it's it's interesting in that I'm still thinking in terms of it's still a political activity. And that's something that a lot of people don't necessarily want to think of. But there's been studies and and and I want to ask you about this that show that people that are most politically active, specifically and and I'm not talking about terrorists here necessarily, but it just average people, the people that knock on doors. to get like a local petition passed. These are people that have disposable income and time to be able to do that. And time is one of the things that every organization individual has. So is is it useful to frame terrorism as as that as well as a as a discretionary political activity? speaker-0: Yeah, that that's a great question. And I guess it depends on what we're talking about. So when you think about Western, you know, terrorism in Western countries, it tends to be more small operation lone wolf type of stuff that's very, very inexpensive. ⁓ you know, like a knife attack on a subway could be ideologically motivated by an individual being ⁓ influenced by a some terrorist ideology or something like this. That's kind of very different than what we tend to see in the rest of the world, which is is large organizations that are that have bigger goals than that and that are dedicating a lot of resources, but also training and time, as you mentioned. I mean, time is precious for all of us. That's really kind of obviously one of the most important things we teach in economics, right? And so ⁓ I think from the terrorist, you know, organization's point of view. Time is a cost to them just like it is for anybody else, in the sense that they have to, because they're there and this would be also true for a cartel, right? When you're operating in either a black market or a shadow market, I think the problem is that everything you do has to go undetected. So think about, you know, kind of before 9-11, Al Qaeda has to recruit people. They have to engage literally in what we talk about, like a specialization in the division of labor within. The nonprofit, you have some people are gonna be the hijackers, some people are raising money, some people are training, you have an ideological wing. You have all these different aspects of the organization, and they have to go below the radar as long as they possibly can to try to get to the goal, which might be, you know, we're building up to the coal USS coal bombing, or we're building up to an embassy attack, or whatever it may be. And so time is certainly a dimension of what they do. ⁓ so I I think that's true. Whether you're talking about a lone wolf or an organization, I think the harder part for the organizations is that there tends to be a bigger spotlight on them once we know who they are from a counterterrorism perspective. So what they do, the time that they need to execute ⁓ anything that can intercept that, and of course there's a lot of resources directed at intercepting that, is a cost to them. And they are managing those costs just like any other firm is, right? So in the same way that a legitimate, above board firm is trying to minimize cost. I think terrorist organizations are trying to do that too. speaker-2: Yeah, like when when ⁓ they they ⁓ Hezbollah got a great deal on beepers from a shady ⁓ Eastern European company and th those drill turned out to be little bombs that they were walking around on. And and Israel wiped out Hezbollah with almost one operation. speaker-0: Right. And it's asymmetric information too, sorry Lila. speaker-1: I just wanted to jump in because listening to you was really ⁓ you know, resonating with what we we always hear that incentives matter and how to teach, you know, the next generation of professionals and not just like national security professionals, but any kind of professionals about how to see what are the incentives ⁓ when it comes to decision making in their own field. ⁓ I'm a lawyer by training and my legal education was ⁓ really lacking any kind of educ ⁓ education on economic literacy. and incentives. And ⁓ of course, it's really interesting to see how ⁓ theories like public choice theory come in the game and and broader ⁓ economic ⁓ knowledge. And I was just wondering what educational institutions should do better to train ⁓ their professionals in their certain in their in their ⁓ profession, in their field, ⁓ when it comes to economic literacy and learning about incentives and unintended consequences. You know, what can go wrong? ⁓ and ⁓ and I think it's it's it's a it's an open ended question, but I would ⁓ pick your brain on ⁓ how do you see this? speaker-0: ⁓ yeah, of course this is you know kind of what I've dedicated my adult life to, which is trying to just teach the economic way of thinking. I really don't think w what we need to say to people is you have to all go get masters in economics or a PhD in economics. I don't and then kind of put those people into these ⁓ jobs, you know, in the IC or in policy or in law to to use your field. I think just across the board. A basic understanding of the economic way of thinking and and what I think we mean by that, that phrase is not, you know, mine, ⁓ that there's a long tradition of thinking like that, but it's just this idea of what you just said, incentives matter. And, you know, back to the the start of this conversation, people tend to throw that thinking out the window when it's something horrific. So, you know, if you think about kind of somebody breaks into your neighbor's house in the middle of the night and steals everything. That's horrifying. ⁓ that probably scares you for years and years and years. And you do a lot then to kind of recover from that. You you invest in new security, you do all these things, right? It's just it's a life-changing type of event. And so when we have those types of events that we either see in our communities or or you watch on the news, you think those the people that do things like break into people's houses or hijack airplanes or whatever it may be, they are not like me. That is kind of a I think a human nature kind of reaction, right? Which is like they're crazy, they're deranged, they're not like me. And and certainly parts of that are true, right? People who do horrific things, we don't understand it because most of us would never do that. But I think the economic point is that they are human beings who respond to incentives. And if you want to change the behavior, which I am not suggesting is easy, but I am suggesting it's possible because they're human beings who respond to incentives. And so That needs to be our starting point. And I think what we can do is start teaching these basic ideas. ⁓ you know, unin you mentioned unintended consequences, which is also an important part of the incentive story. The problem with I will say this too, when you think about policy reactions to things like 9-11 or things like drug trafficking or or whatever it may be, policy re policy is always reactive. Because it has to respond to what has already happened. So that's that's kind of one issue there, which we can't we just don't have all the information that we might need. But I think we tend to then throw that economic thinking out the door because we say, I want to be safe no matter what the cost. Right? But I I I don't actually think that's true. I think we do want to be safe, but at the right cost, not at any cost. I mean, if you want to live in it, I I always talk about this when I kind of talk about this idea of terrorism or when I'm talking to my students. ⁓ there's no such thing as a world with zero terrorism, and there there literally never has been. So there's as long as human beings have coexisted, there's been terrorism of one form or another. So the economic question is not, or nor is the policy question, how do you get to zero? Right? And and if when you think about the language, the war on terrorism, this to me. Presumes that it's n a never-ending policy effort. ⁓ because how do you define terrorism? We could always change the definition and then we kind of, you know, what does it really mean to have a safer world in terms of terrorism? Well, I think you can actually look at that and make objective statements. I want to eliminate Al-Qaeda's capability to engage in, you know, I I we could have objective goals and then we put ⁓ efforts in to meet those objective goals, but we can't Ever escape cost-benefit analysis, which is another kind of idea in economics. So that's the problem. And I think part of the problem is because in policy, we're collectively deciding, right? Privately, we make private decisions about how secure our house should be to ⁓ defeat the criminals, right? You might get a big dog, you might have floodlights, the sensor lights, you might have an ADT sign in your front yard. We can do all these things, but we don't do any everything that we can. Right? We do what we think is reasonable. So I think in the policy space, this matters as well. It's not just how we treat terrorists. They're not irrational. They are quite rational. I mean, if you look at the efforts that go into these large terrorist organizations, the funding for Hezbollah or the activities of ISIS or the behavior of Al Qaeda leadership, you see rational people who are engaging in cunning cost benefit analysis, always trying to execute their goal and trying not to get caught. So to treat them as crazy is actually a disservice to policy. We have to treat them as cunning and then think about their incentives and then think about how to stop them in their track. So I think counterterrorism, when it embraces the economic way of thinking, does both of those. It says these are human beings that respond to incentives. So that makes me think about what those are. But I also have to think about cost-benefit analysis. And I'm not willing to do anything at any cost because that would have an infinite cost. attached to it, both monetary but also in our freedoms. Right. And so you have to balance these things to get the right policy mix. ⁓ and I think that's where economics goes a long way to help us think about crafting policy that can be as effective as possible, but knowing you don't ever get zero crime, you don't ever get zero terrorism, you don't ever get zero drug use. So I think when we state those as policy objectives, we set us ⁓ ourselves up not only for failure, but ⁓ For you know, kind of never ending high cost ⁓ bureaucratic efforts that don't always succeed. speaker-2: I I read this book a long time ago and it was it was an economic analysis of just the Madrid bombing back in the early two thousands. And it extrapolated all of the economic ripple effects of of that bombing. ⁓ you know, everything from the security costs to the insurance to the the lost wages to the the the way that people traveled in the city to the way they trained police. And it just kinda and and when y when they came up with like the end number, it was this ridiculously astronomical number, just the ripple effects of that one act, way beyond the immediate aftermath of that of that impact. And I I I want to take it back to just sort of your your academic background, because I remember when I got into my PhD program a long time ago, I wanted to study state failure, and everyone I wanted to work with left. So I ended up with I ended up with a lot of finance and economists and when I started to realize that if I put these things together, I was an Arabic major in undergrad, ⁓ with with that I started to g see things that like nobody else was really talking about. And I had to almost learn two completely different languages in order to talk to these completely different academic specialties that really don't talk to each other, certainly not very well. And ⁓ I I wanted to ask you about what that was what the what what challenge that has been like for you in the sense that you had to it it it almost feels like you have to speak two languages at once. It it really does feel like two languages. And you have to be able to sort of code switch between them while also talking about the same phenomenon, not to mention the cultural specific, you know, peculiarities of whatever terrorist group you're talking about. ⁓ you know, how have you what's been the biggest way that you've overcome that? speaker-0: Yeah, that's a that's a great question. I you know, I think because it when I started this, I was in an economics department and I was at George Mason University, which just is it just an an intellectually exciting place because they love this kind of stuff, right? They they're say they loved that I was saying, Okay, I'm gonna I'm looking out at what's happening in the world. I think economics has something to say about it. ⁓ but you're you know, you're absolutely right. When I started my research, there was really like nothing from economists. There was political science research. ⁓ and that is still ongoing and very valuable to me. But it's it is exactly what you're saying. It's the way that traditional political scientists kind of assess terrorism. I think, and now of course, 25 years later, we have so many econom economists looking at terrorism, which I think is great. ⁓ so the field is more full. And I think it's a interdisciplinary field, and I actually think that's what we need. I don't think we should say it it should it's one or the other. But I think we need these interdisciplinary centers and efforts to have people come together to say, okay, the political science perspective on this is this, the economic perspective on this is this. And and for me, I th I think in terms of political economy, and that's how I start to break down those silos for myself and the way I talk about this and also the way I teach it. But but also in then just the way I write about it, which is to say this is not just. Some sort of you know cost-benefit analysis in a lab where we're, you know, not dealing with the real world. We want to deal with the messy institutions, we want to try to understand them, ⁓ we want to take deep dives where we can, and we want to really look at the research insights in other disciplines. What are historians saying? What are political scientists saying? What do philosophers have to say? I mean, I think you actually get a much more robust picture. of a topic when you do it that way. ⁓ so I'm not one to say economics is the only thing that matters. ⁓ but I do think in terms of terrorism, economics is is very often left off the table because that was, you know, your original point is like people don't think like call you when they have a question about inflation. They don't necessarily say, let me get somebody on the phone because I have a question about, you know, Al-Qaeda's long-term plans or something like this. So, but I I I think the way we do that is we say, Economics brings the calculus of choice into the center stage for us, right? So I think that's how, and when when you approach economics that way, I think it's interesting and exciting to people. And so I think that's also how we warm people up, right? We say we're not coming in necessarily with a model for how to model terrorism into the future. And certainly economists have done that. I'm not saying that's not a good idea, but I think just thinking about the political economy of terrorism and how that can affect good policy decisions, that's exciting to people. ⁓ I think get them on board, sorry. speaker-2: Y no, no, it's fine. ⁓ 'cause you bring up political economy and a lot of people think, especially now, younger people especially, they think that ⁓ ec economics and politics are like these separate things. And ⁓ I remember there was a great political economist from like the nineteen forties called Carl Polanyi. He was talking about how economics is embedded in cultural, you know, dynamism and paradigms and how culture actually determines what those incentives are and how people behave differently. And I wrote this piece long time ago on ISIS and how they were using ⁓ gold and silver coins. And I compared that with like Islamic law and all these things like that, and how it didn't make sense from even ⁓ an Islamic standpoint, but it made perfect s ⁓ sense from a ⁓ money laundering standpoint. ⁓ you know, because the the coins that the that they were using ⁓ were were almost never found. But yet when ⁓ when NATO and and the US were bombing these ISIS sites these massive pillars of cash were flying up into the into the sky w and these were not clearly not silver and gold coins. They were hoarding real currency. ⁓ so I wanted to ask you, like how does how does the that cultural aspect of political economy frame into the work that you do? And how can that be better integrated ⁓ into teaching this stuff? speaker-0: Yeah, I love this question because I mean, I think for a long time economists and you know, I mean, it I'm talking about like the last hundred years, you know, I think for a long time or more, they rejected not rejected, but didn't know how to empirically measure culture. And so it was just kind of ignored, especially with empiricism gaining and and kind of what Hayek would call scientism gaining preeminence in terms of kind of how economic research was ⁓ was executed. And so ⁓ I think that culture was tricky. But I think if you say, okay, it's not about fitting into my model. It's about fitting into my understanding of why people choose to do certain things that might not make sense to anybody else. So let's just take a very simple example. I usually when I talk about institutions with my students and then I'll try to tie it to terrorism. But you know, w when we tar start talking about this, and I try to make an effort to talk about equal institutions and and you know what we mean by that is the rules of the game and the rules can be formal like the constitution of the United States and the rules can be informal and they govern small g our behavior right so culture is all all wrapped into that and it's about how people perceive their reality. So as economists we're not trying to say well this means we're gonna excuse any behavior because of culture. But it's gonna help us understand why people believe they should do things and also why they believe they should refrain from doing things. And so, you know, I think culture and growth and robust institutions, all of that is a very important fields of study, which of course we're st we're doing much better job now of studying. ⁓ but the example I use with my students is this: in the United States, on October 31st. If you dress up in a costume and you knock on a stranger's door and you ask for candy, you'll get it. And you would it would be like weird not to get it. Not that you don't, you know, you don't get it at every door, but like some people are like, I don't like Halloween, I'm gonna, I'm gonna close, turn the lights off. But most people get candy. Now, if you do this on like May 12th and you dress up in a scary costume, you know, I have a 16-year-old son, so he wants to dress up like the scary stuff, you know? I'm like, if you do that. On May 12th at 7 p.m., you're gonna get arrested. It's weird. We call the cops, right? So, so that is helpful to understand institutions. This is ⁓ spontaneous, it's evolved over a long period of time. There's there's not even like firm rules about Halloween. Like, what time do you start trick-or-treating? This is number one question in my neighborhood Facebook group every year. And I'm like, we always just start like when we start. It's not a big deal, right? So there's no like formal rules, but it's okay on this day. So people do it. And in other cultures, they don't celebrate Halloween at all. Or maybe they celebrate something like Halloween, but they do it in a different way and on a different day, and et cetera. ⁓ so that's the thing, is that this is very bottom up. And it it again is one of those things that on October 31st in the United States, I can do things in a peaceful way, but that I really don't do on other days because it would be weird and annoying and bothersome. And so I think that's a helpful way for us to understand culture, which is that. And this is not a switch we can flip on and off to reintroduce Hayek again to the conversation. Because I think the institutions that govern societies matter for how people try to solve their problems. And I think terrorism is ultimately about social change. And I'm using the word social there pretty broadly: political, legal, religious, economic, cultural. I would I would put all that in there, right? And say terrorists are doing. These activities because they think it will realize some goal for them. And so their perceptions about reality matter for what they do. That's important for us to understand because we need to figure out what would a world look like where very few people who live in Afghanistan, for example, choose terrorism as a way to engage in like politics. Right? Like what does And I think what economics opens our eyes to is that world is possible. It might not be likely, but it's possible to have a peaceful Afghanistan where you don't have terrorist violence kind of narco state going on, right? But then you have to so you say, okay, this world is possible, but why don't we have it? Well, we have all these broken, dysfunctional institutions, and we have a culture where violence is kind of the way. That you get on top in that society. And so, how do you break those institutional norms is very hard. And it's certainly not a matter of like the United States telling them not to do it, right? So it I'm not saying there's not a role, by the way, for the United States, but I'm just saying that cultural institutional norms have to be changed largely internally because they're about the beliefs of the people and the b the expectations they have of their social. They're polis, right? Their living condition. So I think it's actually a much counterterrorism, I don't think is that, right? Counterterrorism is stopping terrorism, making terrorism more expensive, ⁓ displacing terrorists. I think kind of freedom is a longer project, an important part of this project, but not necessarily something that we can flip a switch. Or more than you asked for, sorry. speaker-2: Yeah, you can't No, you ca you can't just drop ⁓ the Federalist papers from the sky in a local language and and say, you know, they'll figure it out. speaker-0: Exactly. speaker-1: Yeah, actually listening to you about ⁓ incentives and institutions ⁓ brought up ⁓ a presumption I often hear that poverty is one of the biggest incentives behind terrorism. And of course that's this would mean that everyone in poverty is a potential terrorist, which which sounds stupid and obviously it's not true. But I I I wonder like What's i what i what's the evidence ⁓ there? Is there any evidence showing that there's a relationship between poverty and terrorism as an like an incentive behind it? Or ⁓ it is something where we need more ⁓ economic ⁓ education to understand what really happening what is really happening here. speaker-0: Yeah, no, I think it's the latter. I think that this s I this is just a for whatever reason kind of seems to be a salient talking point in the discourse. But if you look at the academic literature, ⁓ and of course terrorism is a difficult thing to study in kind of an empirical way, right? Well, I mean we c we have a lot more data than we did certainly twenty-five years ago, and we have institutions dedicated to tracking and following this, but even you know, from a terror finance perspective, which we've been talking about, still really hard. To get our hands on a lot of the information that we would like to get our hands on. But to the extent that we can know things, ⁓ this is just not really true. ⁓ Alan Kruger wrote a really important paper on this, just like kind of looking at ⁓ hate crimes and ⁓ economic conditions. ⁓ But what we what we tend to see even with kind of radical ideological terrorism is that. ⁓ there now there may be a distinction in economic ⁓ status between the leadership and the recruits. So I saw that when I was looking at ⁓ Al Qaeda, you know, kind of the lead, but it's interesting, right? Because the leadership of Al Qaeda, these were highly educated and wealthy people. ⁓ it it's more likely that the people who are being recruited into the organization at the at the lowest levels have a lower economic status compared to the leadership. But it is not true to say that poverty leads to terrorism at all. ⁓ and it's certainly not true to say that it's about education. So I think the reason that these remain salient kind of in the in the discourse is because it sounds easy to hook my brain around that, right? Like, well, okay, if we just like solve poverty, then we're also gonna solve terrorism, and solving poverty is good and of itself, which is true, right? I actually think interestingly, the answer to this. Is economic development. And and that also deals with the poverty problem, right? So economic growth, economic development requires robust institutions. That what we were just talking about. I think you're more likely to see terrorism in countries that have dysfunctional, broken, oppressive, violent institutions that don't have the rule of law, that don't have secure property rights, and that don't have a legitimate government. So this institutional dysfunction is much more of an explanation. Why? Because Of the definition, right? What are terrorists doing? That's they're not doing it to kill time. They're doing this to achieve some set of stated goals. And they believe that in the institutional matrix that they exist in, that this is an effective way to do that. ⁓ I don't think it's very effective most of the time, by the way, but I think terrorists can make some headway. So I think the solution here is is ⁓ well, I think the the problem is broken institutions. The solution is figuring out how to. How to help people reform those institutions. But I don't think just poverty, which is an issue in and of itself, leads to terrorism. If it was the case, actually, then you know, we should see a lot of poverty, or excuse me, a lot of terrorism, not just today in the poorest countries in the world. And we do see some correlation there. But look at the world 100 years ago, where there was just a lot more poverty. There was not necessarily a lot more terrorism in the way we we absorb terrorists ⁓ you know, the terrorist ism we see today. So yeah, I think that we've debunked this in the literature. ⁓ I think we need to debunk it in the public square a little bit better. To to speaker-2: To to flip that around, you know, historically I'm thinking of ⁓ a lot of ⁓ a lot of terrorists, they seem to come from middle class, upper middle class, or even aristocratic backgrounds historically. ⁓ you know, Europe in the nineteenth century, Latin America in the twentieth century. These were, you know, not the the most impoverished people. These were actually fairly educated, ⁓ very well trained professionals in a lot of cases. ⁓ you know, we found ⁓ j you know, jihadists with ⁓ you know, who are cardiologists and stuff like that. Right. And and in Latin America, you know, you you know, you think of revolutionaries that ultimately took power, they started out as, you know, Marxist terrorists, but they they came from aristocratic backgrounds. And so why why is this I guess you could say the terrorist entrepreneur who sort of lead these movements, why do they seem to come from these ⁓ backgrounds that from you know, a purely Western cost benefit incentive standpoint would absolutely make no sense. speaker-0: Yeah, that's a great question. I think part of it is that they have more time on their hands. I mean, think about being of the poorest people alive on the planet today, which we would describe as like living somewhere between two and three dollars a day. If you're living between two and three dollars a day, you are not forming, investing time and energy into building a terrorist organization. You are trying to survive. So I I really think and that goes back to your question that you asked me earlier about like knocking on doors and and the time element. ⁓ so I think part of it is that. I think part of it is ⁓ certainly your worldview and ideology matters. I I think actually inside a terrorist organization, ideology matters for ⁓ radicalizing people to do things that they would not otherwise do outside of being paid in an organization. Like think about it. I mean, being at engaging in a terrorist act is it doesn't really from our perspective, right, match the cost benefit analysis for things I want to do with my time. And so we, you know, terrorist or and this is back to the terrorist as a kind of nonprofit, they have to compensate people. ⁓ even very poor people, you have to compensate them to ask them to do these things. So I think what they're doing is they're recruiting them into an organization where they can control them. Where they provide food, where they provide shelter, and where they provide training. And I think that inside it's easier to radicalize. And radicalization is for the purpose of completing the objectives. so I you know, I think this is this helps us understand what's going on. But yes, I think if you're from a middle class educated background, I think maybe your education matters. ⁓ I think in terms of kind of modern Islamic Fundamentalist terrorism, there's certainly a ⁓ an anti-Western kind of anti-capitalist type of ⁓ ethos. ⁓ that, but that's part of the radicalization, right? So that that's again, if you're living on $2 a day, maybe you hate capitalism, maybe you don't, but you don't do anything about it, right? Because your time is is really dedicated to I've got to eat today, I've got to survive today, I've got to find shelter today. And I've gotta do it all again tomorrow. So I really think that's part of it. speaker-1: Yeah, this is what kind of what the radicals ⁓ is about, right? ⁓ the the book by Shaolansky saying that if you keep people ⁓ you know, just poor enough, so they have just a little bit to to lose, they are not going to make a revolution because they don't have time to do that. And they are afraid to lose that little bit of ⁓ you know, of their living that they already have. So it's kind of it's kind of interesting ⁓ how how it works. ⁓ I was wondering when it comes to financing and and and terrorism, is there any trend the West should watch closely? ⁓ what kind of ⁓ you know, methods, technologies ⁓ you you see there and how, for example, new waves ⁓ like ⁓ cryptocurrency comes into this game of ⁓ financing terrorism? speaker-0: Sure. Well, when I started doing this, you know, there was no such thing as cryptocurrency, which I guess is a testament to how old I am. ⁓ but which I try to downplay. But anyway, ⁓ you know, I think that as it pertains to cryptocurrency, maybe, you know, and I'm certainly not an expert in this, but in some ways it's maybe a bit of a wash. Yes, it provides them ⁓ a potential opportunity to move resources, to move money, to move assets around. ⁓ but you know. Cryptocurrency also has a public ledger. So I think that from a kind of ⁓ forensic accounting point of view, this ⁓ this actually ⁓ makes it difficult ⁓ you know difficult for the terrorists because maybe there's more opportunities to intercept ⁓ what they're doing and where they are and who they're working with and things like this. So, you know, I think again, when we're talking about terrorist organizations, they are Not stupid, and they are diversifying their portfolios. And that includes the way they handle cash, the way they move cash around. So they don't literally put all their eggs in one basket, right? So what we tend to see is they engage some terrorist groups will engage in illicit activities like human trafficking, drug trafficking, ⁓ but they'll also diversify their portfolio and engage in legitimate commodity sales. ⁓ or just legitimate markets. ⁓ I think one thing we need to look at is ⁓ state sponsors ⁓ as well, which I I think again that information is very hard to come by. I know, of course, if you're you know, kind of in intelligence circles and communities, I'm sure they're working on this day and night. ⁓ because that really gives a lot of leverage. If you're getting an you know, kind of a payment or an endowment from a state ⁓ that can be ⁓ somehow ⁓ protected in terms of where it came from, w how much it is, when are the payments made, how are they made, things like this. That gives a terrorist organization a lot of leverage. It also comes with costs for that organization. But ⁓ you know, I d I I guess what my answer to your question is I don't think it's all about cryptocurrency. I think just like anything else, terrorists are going to use all the technological tools available to them that advance their mission. And it might create problems for how we trace them, but it also might create opportunities. ⁓ some of them are gonna still use traditional Hawala types of methods to to move resources. Those are very, very hard to trace and track. ⁓ so I think the intelligence community is still essential for us in terms of being able to get information on that. But that's long, slow, and difficult. ⁓ so you know, I think in some ways technology has changed what they do, but I think it's more changed just an avenue of what they do. I think I think they're smart and clever and trying they know if something gets shut down. I mean that's I worked in in ⁓ terrafinance ⁓ right right after I got my ⁓ I finished my doctoral work. And you know we that's part of counterterrorism in terms of Terrafinance is we would try to figure out what was going on, but then we would ask the Treasury Department to freeze the assets. So there's disruption techniques available to us But I I would I would urge everyone to not just feel satisfied with that. And the reason I say that is because that doesn't stop them. It slows them down, but they reroute. They reroute and they try to find other ways. So we have to do it. But it ⁓ it's I guess it's a necessary but but insufficient condition. You have to do that, but we ultimately have to find out, ⁓ you know, fix these institutions and and and kind of some of the other things that are that are actually much more difficult. speaker-2: Yeah. So I I guess I have two questions. one is when people think about terrorist financing and certainly the way it's taught, a lot of ⁓ certainly in the popular sphere, the policy sphere, but also in academic literature, ⁓ the people tend to think about the the actual financing as money or cash, as opposed to value, how value is moved. So I wanted to ask you first about how Value versus cash actually plays into this. And this leads into my second question. a few years ago I wrote a piece on on East Africa and terrorism in East Africa and intelligence, and how in the absence of political institutions, the economy still continues. How economic behavior actually can tell you and fill in gaps of intelligence that you wouldn't otherwise see. And most of it's open, ⁓ far more open than trying to, you know. tap a specific phone or follow a specific email address. ⁓ you know, the the actual economic behavior will tell you who's in charge in a specific area, who's got control of what. And I'm thinking about Somalia, you know, for example, it looks like a failed state, but for a few years the business groups bought off all the warlords and actually somewhat stabilized the the worst of it. And and how it was actually economic actors that filled that void. And if you're watching the economy, you would have s you would have seen that. But if you were watching you know, just for terrorism and political intelligence, you're just looking at this chaotic cloud. ⁓ so I wanted to ask you the ⁓ the follow up question to the to my first one was is how does the the economics and the economic behavior actually assist in intelligence? speaker-0: Yeah. ⁓ I think you're right. I mean, I think you you said a lot there that's very valuable. The economic behavior is what we're looking at. And we're not just as you I mean, the way you put it is perfect. It's if you just look at the GDP or something of Somalia, you're gonna be like, There's nothing happening, right? There's nothing going on here. But that's not what we're looking at. Those are certainly macroeconomic economic indicators that we care about. But when we get more granular, Right? We're actually seeing who controls what, what assets are being moved, who's responsible for allowing something in or something out in terms of trade routes and things like this. And so to the extent that we can get that intelligence, we can actually get a much better picture of who is calling the shots, right? What is allowed at economic activity, who controls that economic activity, ⁓ who controls the terms of it. And and under what conditions does it change? And even so I think sometimes when we have such obfuscated information, right? ⁓ when we're and we when you're thinking about intelligence collection and and the policy response, maybe, ⁓ I think it's it's it's easy to look at that and say, I there's never there's no possible way to make any sense of this. But I think ⁓ we can in exactly the way you just described, which is it's not always about the formal economy. Especially in a place like Somalia or Afghanistan or what we would consider failed, you use the word chaotic, right? Those types economic activity is always happening. and you know, my favorite, this is like a silly reference, but I like to make it. My favorite line from the movie Jurassic Park, which I hope everybody has watched, ⁓ you know, is like they go on the the theme park and they're walking around and they bring the scientists. His name, his actor's name is Jeff Goldblum, I forget his name in the movie, but he's like, Unimpressed by this whole thing. He's like, no, no, no, you can't change nature, et cetera, et cetera. And said, you know, they're they're saying, well, the dinosaurs, you know, they're like neutered basically. They're not gonna, there's no problem here. And he says, Life always finds a way. And that, as an economist, is my favorite line from that movie. Life always finds a way, right? So there's always an economy, there's always economic activity going on because people, ⁓ self-sufficiency is the road to poverty, as we say, right? So even in Somalia, a failed poor state. People are exchanging, there's levers of power, there's trade routes, there's things being bought and sold every minute of every day. And so being able to have a view of that helps us understand the political realities, even if they're not formal political realities like you know, we would expect to see in other types of either adversarial countries or friendly countries. And so I think it tells us a lot about what we need to know. So we don't, I I guess your question partly is. You know, we're thinking about counterterrorism, we're thinking about intelligence. We're not just looking at the formal indicators. We really want to get as granular as possible. Not that that's simple. It isn't always. ⁓ but it tells us a lot about a life and who has what and who gets what and who controls what. And that can give us a lot of powerful information that we might need to be able to use to change those conditions. speaker-2: For how how is this trickle up into different, you know, policymakers and and how does value play into this? Because it seems like a lot of our tools are designed again for the formal economy, not really for the transfer of value, right? And I'm thinking of like under invoicing and over-invoicing. You can move value without having to move a specific pile of money with the that's you know perfectly denominated. And it seems like that's ⁓ that's something that a lot of ⁓ Not only economists, but policymakers seem to not understand. And you see, and you see this with everything, you know, from from taxation policy to to tariffs and things like that, because you're actually talking about value, which is what everybody's really interested in, not just the actual cash. ⁓ you know, b Bitcoin, how bit how valuable is Bitcoin? Well, nobody really knows because it's the value that we ascribe to it, just like our dollar. You know, you could you know, you look at like our our dollar, how is it so strong when we have a debt, you know, and God we trust, it should just be trust me. you know, how how how does that how does that like how does that play into this? speaker-0: Well, I mean, I don't know if I have a great answer to that question other than to say it seems to be that what you're raising is that we always I guess well certainly in intelligence we never have a full picture. And I think you have to understand that going in. ⁓ you know, it's it's not like doing a puzzle. You know, when you do a puzzle, the first thing you do is you put all the pieces on the table and turn them up. And then you put the box in front of you because you're building towards that. There there's a there's an outcome that you know what it is. I think an intelligence is very frustrating because we don't have that. ⁓ we don't have an outcome that we know we're learning, and then we have to adapt. And so this moving a value issue, I think part of in in the intelligence world that's separate from tariffs, but I can talk about that too, is that ⁓ you know, what we want to know is that the the levers, the mechanisms that terrorists are using to be able to do what they want to do, to put it, you know, mildly, I suppose. And so I think forensic accounting and things like book transfers and all these types of things are useful to try to learn what's really going on. Cause at the end of the day, that's what we want to know. We want to know the value of the the terrorist organization, the resources it has at its disposal, where it gets them, ⁓ and what what is the purpose? To what end is all that being directed? Not just cash, right? But even assets, credibility, ⁓ homesteading, partnerships. How do you measure partnerships on an accounting ledger? You don't. But I would argue that kind of the cooperation that we saw between Al-Qaeda and the Taliban in the pre-911 world when they were both in Afghanistan was extremely valuable. But you know, kind of coming up with a formal measurement for that, I think is I think is really hard. ⁓ so I don't know if that answers your question, but I I would say that this is I think the ongoing work that happens in intelligence. It's part, it's not just understanding cash holdings ⁓ or the value even of crops or or or the value of commodities. ⁓ if you look out at the internet and you try to figure out what you know, kind of in the I'm sure Ian, you've seen this in your work, you try to figure out like what the richest terrorist organizations are. First of all, I think people that work in the intelligence community know what we don't know. But if you just try to find articles on this, it's just very hypothetical. Right? So we know like maybe ISIS had $2 billion at one time. But I think, like, what does that mean? ⁓ I still am unclear about that. So I think that that forensic accounting and this type of stuff is a tool that we have, but it it's certainly not a perfect tool. But I think what you're raising is that there's a bigger picture here, and we need to really understand it to know what to do about it. speaker-2: Yeah, there I remember there the this one book I read. It was using ⁓ models from astronomy of all things to determine how much illicit value was in the economy. And it did it simply by eliminating everything of known value, and you were left with this gravity model of this is how big the illicit economy is overall. And it was from astronomy, and it's a book on like terrorist financing and drug trafficking. And it was one of the coolest things I'd ever seen because they actually used something from physics. to determine this by by just eliminating everything else. It's like trying to determine dark matter. It's like, well, this is how much of the economy is actually illicit as opposed to, you know, everything else. And they actually gave it a G D P at the time and it was like something like Spain for for that year. ⁓ it was pretty sizable, but you know, it wasn't as big as everyone thought, but it was it was sizable. It's interesting. speaker-0: Yeah, you know, this comes up when we even just try to do kind of regular GDP measurements. I think there's a lot we're missing because we can't value it because it's either informal, but we're not, you know, we're measuring what you paid for it, but we're not necessarily measuring how good it is for you. You know, so just anyway, there's a lot of issues with that. But when it comes to trying to measure the net worth of a terrorist organization, I mean part of the reason we care about that is because we want to be able to stop their ability to do that. But what it also tells us about their power, potential power, like what could they do? Right. But I the one kind of terrorist trivia point that I when I say people are always shocked, and this comes from the 9-11 Commission report, which is it is believed that the 9-11 attacks costs like half a million dollars, which is nothing. So my point always when I raise that is that being an effective terrorist organization is not about having a billion dollars. It's about being cunning. It's about being patient. It's about being really strategic. And that is what we should be worried about. I think it's really hard to do, which is the good news. ⁓ but the bad news is when it's done well, you get something as devastating as the nine eleven attacks. And we I think the ultimate solution to this is economic and political freedom. And I say that without at all being trite. That is the solution. It doesn't mean you'll get zero terrorism, it means we'll get a lot less. I think we'll have a lot less transnational terrorism, et cetera. But in the short term, that's not an answer, right? We have to both prevent, disrupt, arrest, all those types of things. But I think the long project is the freedom project. And I say that, you know, kind of I I absolutely believe that, but I think it's very difficult to do. I think we should be optimistic that it's possible and and do things that align align with that. ⁓ but you know, knowing having a realist approach that, you know, it might not happen ever, but certainly not tomorrow. speaker-1: Yeah, I think it's it's fair to say that ⁓ an interdisciplinary and approach where interdisciplinary dialogue is happening ⁓ is really important and ⁓ not just understanding the economic incentives behind terrorism or any other issues, but ⁓ many other areas as we discussed. And yeah, this is one of my takeaways listening to you why it really matters to you know, learn about ⁓ consequences, unintended consequences and policy making and and many more. before we close, we ⁓ we usually ask each ⁓ guest to ⁓ provide a question for our next guest and we also ask a question from the previous guest. So ⁓ I would like to ask you ⁓ a question from Stephanie Slade ⁓ who was talking about fusionism and her question ⁓ was about socialism She mentioned that we see that ⁓ socialism has been tried and failed in multiple parts of the world, ⁓ in multiple times ⁓ in the history, and we still see that there are attempts to revive it in ⁓ in newer and newer areas. So why why is that? Why humankind is still curious to try and see if it ⁓ if it is not failing this time? ⁓ what can be the background of this? speaker-0: Well, I love Stephanie Slade and your interview with her. She's great. And it's a great question, and it's a perplexing question. and I will I will have to constrain my remarks because I could talk about this all day. But I think it's dangerous. It's dangerous to flirt with socialism, particularly not only because every time it's tried, it's failed. So we have an imp empirical case to make a very strong empirical case that this doesn't work. We also have a theoretical case that this doesn't. work. And so ⁓ the jury is not out. The jury is out on this, right? Like we know that central economic planning not only fails to allocate resources in the most productive ⁓ way, according to the ends only that can only be known by individuals, but that it always is associated with authoritarianism. And I think that's that's where I worry Especially in the United States where we see ⁓ you know ⁓ younger generations seem to be toying with this. We have ca ⁓ political candidates who are just ⁓ explicitly they call themselves democratic socialists. I think that's important. I think we should think about that and press them on it. Can you be a democratic socialist? I actually have a paper that is is under review right now with Rosalino Candela of the Mercatus. ⁓ center at George Mason University, and we argue that it democratic socialism is not possible. ⁓ because when you centralize economic planning, you have to centralize political planning because you have to tell people what to do, when to do it, how often to do it, when to stop, and what the price will be, etc. So ⁓ I think it's dangerous, but I I guess the part that's not the full answer to the question, because you knew I was gonna say that, right? Like why do people think this is a good idea. I think it sounds very nice on paper. I think it sounds very nice on Twitter. That's why. I think it, I mean, think about the reality of somebody who went to say Columbia University and might have $250,000 in debt. And they get a great job in New York City when they're done. Maybe they make $100,000, but you have, you know, a quarter of a million dollars in debt. You have to live in an apartment. It has 700 square feet with two roommates. Like this is the reality for people, okay? For some people. And so you you're kind of on this uphill climb when you're young and you don't know how you're gonna ever be able to provide for children if you want them or get married or have a house, all these things. And so politicians come in and they say, look, this is none of this is your fault, and you shouldn't have that debt. And we're just gonna tax billionaires and very rich people, and we're gonna give you some of their stuff. That's compelling. Or even at a lower level, we're gonna give you free buses and government-owned grocery stores because we wanna deal with affordability. I think dealing with affordability is right and good, but socialism doesn't deal with affordability. It makes things less accessible and more expensive. And who benefit? I mean, nobody benefits from that, but the people that will be okay are rich people. The people who will not be okay under that regime are people working class people, middle class people. They will suffer the most. So I think socialism. regressively punishes the working class. And th that's the very category of people it aims to help. And we've got to get the economics clear, but we have to be winsome in the way we do that. And I think that's where economists can do a better job. Because if we just run around talking about efficiency, we're going to lose. We're going to lose the battle. I think socialism sounds good because it sounds like we care for people. And I think what we need to show is that capitalism cares for people. By inducing ordinary people to be entrepreneurial in terms of solving other people's problems. So that was like a whole mouthful, and I could talk for an hour on that, right? So this is a hard thing to do because you're competing with this stuff is just free. Right? And that's very hard to compete with, but ⁓ the free is never free. Somebody always pays for it. I I won't even let my students use the word free. So, anyway, that's my short answer. I think it's I think we will pay the price for flirting with this. speaker-1: Yeah I think it's great. It's it's really a great ⁓ and ⁓ kind of you know like amazing answer. ⁓ I I it reminds me to a video I saw recently on Twitter or X. ⁓ it's the independent woman's voice video about take me back to the to the past because ⁓ it's it's playing with the back to the future video where ⁓ a young socialist girl, you know, wants ⁓ free education, free housing. ⁓ you know, government operated ⁓ grocery stores, everything is so beautiful, so idealistic. And then ⁓ the guy from the future comes to take her to the future and show this is all happening. It's your dream future. Come to see it. And ⁓ she she shouts in the end, just take me back to the past. I don't want any of that. Because she goes to the store and there are no products in the store. Yeah, everything is free operated by the government, just nothing is available. You know, ⁓ you yeah, yeah, you go to the go to the hospital, yeah, it's free, just you have an appointment with forty eight months from now. These kind of things. It's just hilarious. speaker-0: Yeah, it's dangerous. I mean, I think that we need to do a better job of communicating the message, that markets allow us to care for our fellow human beings. I think that's a compelling message and it's an inspiring one, but we need to do a better job of of helping people understand that that's not just a talking point that it's true. speaker-1: That's that's great. speaker-2: economists, good ones will will save the world. ⁓ we need more of you. ⁓ speaker-1: And you you're qu we shouldn't forget her question. speaker-2: Yeah, so ⁓ we wanted to so ⁓ on that note we actually our next guest is Daniel Di Martino who's experienced socialism firsthand. and ⁓ and knows the the difference. ⁓ experiential learning is not something you want with socialism. But ⁓ what question would you have for him? speaker-0: ⁓ so I I think my question for him is not so much about socialism, but there seems to be a growing movement on ⁓ both on the left but also increasingly on the right that is advocating for degrowth. So not socialism per se, but right like economic growth ⁓ has given us a lot of stuff, but it's corroded civic virtue and our morality and ⁓ all these types of things. So I'm thinking of people on the right like Patrick Denin, right? ⁓ who just want to go back. I mean you you just mentioned Lila about like take me back to the past. ⁓ but the degrowthers want to take us back to like 1950 or something like this. And so I have questions and maybe I can't get outside of my economist mindset, which is that I think economic growth is a moral imperative. So I don't understand degrowth so much so that you have two people on the left, ⁓ Derek Thompson and Ezra Klein writing a book about abundance. Two people on the left. We need to embrace abundance. So I would love to ask him about why he thinks degrowth is popular, both from the right and the left perspective. speaker-1: Great question. Maybe I'll ask him. speaker-2: It's a great question. speaker-0: I'll w I'll have to watch so I can see what his answer is. He's awesome, so that will be a great interview. speaker-1: And thank you so much for your time today. We really enjoyed talking with you. speaker-0: Thank you for having me. It was really fun. speaker-1: Thank you everyone for tuning in today and listening to our conversation with Anne. We really enjoy to have you. ⁓ NES is a membership organization. And if you would like to receive more of this content, please tune in, subscribe, click the follow button, whatever you are going to do to listen to us in the future as well. If you want to become our member, please consider joining us. Go to our website and just ⁓ become a member today. Thank you so much. Have a good day. speaker-0: Mm-hmm.