Balancing the Risks, Benefits, and Costs of Homeland Security

The cumulative increase in expenditures on U.S. domestic homeland security over the decade since 9/11 exceeds one trillion dollars. It is clearly time to examine these massive expenditures applying risk assessment and cost-benefit approaches that have been standard for decades. Thus far, officials do not seem to have done so and have engaged in various forms of probability neglect by focusing on worst case scenarios; adding, rather than multiplying, the probabilities; assessing relative, rather than absolute, risk; and inflating terrorist capacities and the importance of potential terrorist targets. We find that enhanced expenditures have been excessive. To be deemed cost-effective in analyses that substantially bias the consideration t oward t he o pposite conclusion, the security measures would have to deter, prevent, foil, or protect each year against 1,667 otherwise successful attacks that each inflicted some $100 million in damage (more than four per day) or 167 attacks inflicting $1 billion in damage (nearly one every two days). This is in the range of destruction of what might have happened had the Times-Square bomber of 2010 been successful. Although there are emotional and political pressures on the terrorism issue, this does not relieve politicians a nd b ureaucrats o f t he fundamental responsibility of informing the public of the limited risk that terrorism presents, of seeking to expend funds wisely, and of bearing in mind opportunity costs. Moreover, political concerns may be overwrought: restrained reaction has often proved to be entirely acceptable politically. And avoiding overreaction is by far the most cost-effective counterterrorism measure.