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