Use of Indifference curves/isoquants to show anti terror policy effects

This article posted sometime back , was been taken off due to some errors that were noted . A rewritten version has nowbeen be posted (aug 18).

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  This article shows how some of the conclusions of previous two articles can be deduced by extending Indifference curve approach of consumer theory.( as against previous version of this article, we need to assume that terrorists want to maintain same level of terror intensity- shown by each Iso-Terror curve to properly study effect of different situations/policy)
  
  The graphs 1 above shows indifference curves as used in consumer theory. Each Indifference curve shows combination of bundles of X,Y that give same satisfaction to a consumer. Higher levels shows higher levels of satisfaction. The negative slope shows that for each unit reduction of a commodity Y, increase in X is required to maintain same level of satisfaction. Declining slope is outcome of assumption of declining marginal satisfaction from each additional unit of a good ( hence requiring increasing substitution of the other good) The line shows the relative prices of the two goods(slope) and the budget of consumer(intercept distance). If price of good X rises ceteris paribus, line becomes steeper and optimal bundle for consumer consist of fewer X and fewer or more Y(depending on nature of Y). The same logic applies to production of any good say bread, butter, guns or any produced good which uses combination of two factors of production labour and capital. In production theory, Indifference curves are called Isoquants ( Iso production curves).
  
  We extend and apply this concept to analyzing terrorist acts as shown in graphs 2,3,4.
  Terrorists acts can be targeted at enemy country or other places of enemy location (other Foreign countries, graph 2), either frequent low intensity attacks or high intensity infrequent attacks(graph 3) , involve low domestic component/inputs/support or high domestic inputs(graph 4) ( here domestic component means support from sources based in target country)


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  When a country tightens domestic security, cost/risk of failed of attacks rises shifting to more attacks in foreign countries as slope of line indicating relative cost of in-country and out-country attacks shifts more in favour of out- country attacks. Thus High vigilance Countries like US and Israel face highest threat in foreign locations on regular basis ( embassies, tourist spots)-GRAPH 2


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  Higher security for same reason leads to fewer but more intense attacks( graphs 3)
  


• If cost of domestic support is increased through whistle blowing or other legal acts, more attacks will have fewer domestic support components and thus will be closer to borders. Incidentally perhaps we can conclude that by location of attacks we can conclude where an attacks has predominantly local or foreign origin in conjunction with other evidence. ( the analogy that can be given here : if domestic component price of any imported good rises, sellers will find it easier to sell high import content products than before - more attacks that are planned outside the country) -GRAPH 4
  


• More micro level conclusions can be inferred ( in conjunction with MAX-OBJ –FN explained below in previous articles) –which areas, which locations, cities, times have higher probability as also which mode/routes( land/sea/air) may be preferred by terrorists)

economic aspects of war on terrorism ( contd)

• In the first reference to this ongoing article ( April-May 2009) it was mentioned that terrorism must be interpreted as a lost cost war by perpetrators and that will open new avenues for policy .
  
  There are many reasons that it is an efficient low cost war by Pakistan.
  
  Acts of terror are actually created by extremely poor, uneducated youth- a source of extremely low cost capital: all that is required is brainwashing and training at existing infrastructure.
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  Alternative of using army with full international backlash is avoided- but results are much superior. Minimal use of resources, minimal backlash, minimum internal disruption ( as in full scale open war) and maximum damage in enemy territory.
  
  Hence
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  There is merit in argument that long run development ( of Pakistan) provides hope for containing terror. In the above context, supply of low cost so called Jehadis” will be extremely difficult overtime- an important element of terror supply network. But this may be a long time coming given extreme poverty in these regions and low rate of growth.
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  From Indian perspective , the question is how can unilateral action dramatically increase cost of supporting terrorism almost on par with effect of full scale war.
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  It seems that diplomatic initiatives may have achieved little: there is no cut in aid to Pakistan, no extradition of people involved or serious domestic trial carried out. Time horizon of one or two years is too short to judge if terror activity has declined as a result of diplomatic initiatives
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  Quick short & serious armed response has the merit of creating great uncertainty, upsetting opposition planning in a seriously effected economy.

• (added and edited) Game theory could be utilized to examine Pakistan;s response by looking at payoffs to both countries in situation a. india uses non aggression option to check Pakistan terror attacks situation b when India uses aggresive approach. Unfortunately 26/11 provided ideal condition for launching an anti terror attack that could have been used to project future Pak response and payoffs. But even Kargil war may have important elements of information thatcould be used to construct payoff matrix for two countries under alternative scenarios
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  India has not considered serious Trade based initiative (trade embargos) as a way of increasing cost of supporting terrorism apart from stopping bus services etc
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  What are the other ways in which cost of supporting terrorism can be dramatically increased?
  
  More conclusions (With reference to previous posting ( July 31)
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  From theory of externality it is shown that increasing initiative to protect oneself from terror threats ( say a city, or commercial establishment) increases cost of terror on other parties as terrorist shift their focus on more vulnerable groups.
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  Hence we can predict that as countries increase vigilance in their own country, there will be more attacks on their citizens located in vulnerable spots( e.g attacks in foreign embassies, hotels etc which meet the criteria mentioned in point 1 in previous article.
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  As indicated before, frequency of attacks will be replaced by fewer but more intense attacks