Friday, April 19, 2013

Economic Cost of Boston Security Shut-Down

The price of security is always a consideration in business.  The manhunt for the Boston bombers is an exogenous shock to microeconomic activity.  A rough estimate of $333M for the cost of silencing the city for one day is not a final figure.  The opportunity cost of lost business does not include the extraordinary costs of deploying out-of-town security forces into the area.  Someone has to pay the bill for the overtime for all those cops, most likely the taxpayers of their home towns.

The final figure will be a baseline for future municipal planning.  Terrorists now know they can inflict hundreds of millions of dollars in damage with the asymmetric use of cheap hardware.  Smart law enforcement planners will find ways to deploy police forces that don't choke off a city's business activity for days on end.  This is where Americans can learn from Russia's experience in dealing with Islamic radicals.  Did Moscow completely shut down when Chechen separatists held a theater hostage?  I doubt it but policymakers need the data.  Dunkin' Donuts stayed open in Boston because cops need donuts even in a crisis.  Resilient systems will survive terrorism.  I could use a donut right about now.