The World Economy (2008) doi: 10.1111/j.1467-9701.2007.01089.x © 2008 The Authors Journal compilation © 2008 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA 255 Blackwell Publishing Ltd Oxford, UK TWEC World Economy 0378-5920 © 2008 The Author Journal compilation © Blackwell Publishers Ltd. 2008 XXX Original Articles International Terrorism G. BIRD, S. BROCK BLOMBERG AND G. D. HESS International Terrorism: Causes, Consequences and Cures Graham Bird 1 , S. Brock Blomberg 2 and Gregory D. Hess 2 1 University of Surrey, UK, and 2 Claremont McKenna College, USA 1. INTRODUCTION T HERE can be little doubt that a complete understanding of international terrorism requires a multidisciplinary approach. Individual disciplines such as psychology, sociology, political science, international relations and religious studies can all make important contributions. Having said this, international terrorism has also been receiving closer attention from economists, and it is from this perspective that we examine it in this paper. What are the trends in terrorism? What causes it? What are the consequences? And what may be done to abate it? It may be helpful to organise our discussion of these questions around the views of the typical ‘person in the street’ (the PITS). Although not based on a scientific study, we characterise this view in the following way. The PITS view is that terrorism is on the increase; that it is undertaken by extremists who are often religiously motivated; that it has important adverse economic consequences; and that, to paraphrase Tony Blair’s statement about crime when he was the UK’s shadow Home Secretary, policy needs to be ‘tough on terrorism’ and ‘tough on the causes of terrorism’. The remainder of this paper assesses the accuracy of the PITS view. The paper is structured as follows. Section 2 examines trends in terrorism and the general perception that it is increasing. Section 3 investigates the geographical distribution of terrorist incidents. Section 4 constructs a simple theory of terrorism building on the existing literature, and examines the extent to which the available evidence is consistent with this theory. Section 5 goes on to consider the eco- nomic consequences of international terrorism, both in principle and in practice. These are subdivided into micro, macro and global categories. Section 6 discusses the policies that may be adopted in an attempt to offset the effects of The authors are grateful to two anonymous referees for their comments and suggestions. The usual disclaimer applies.