Date of Award

12-1-2002

Document Type

Thesis

Degree Name

Master of Arts (MA)

Department

Economics

First Advisor

Dr. Michael J. O’Hara

Abstract

Insurance companies will pay out an estimated $50 billion in claims as a result of the September 11, 2001 terrorist attacks. The enormous consequences of the attacks to both the local and national economy surprised many and have raised concerns about the cost of such events. Predicting the occurrence and economic cost of terrorist attacks is fundamentally different than predicting the occurrence and economic cost of natural disasters. The cost of natural disasters is more predictable and often can be accurately estimated using historical data. Even losses from typical kinds of crime such as burglary show predictable patterns. Both the frequency of and the magnitude of cost events are typically thought to approximate a bell-shaped curve, with the high point of the curve representing usual or customary loss. Occasionally, an infrequent event will occur near the tail of the curve, but these are the exceptions. Even when a tail-event occurs, typically there is no conscious design to make the event’s damage more severe. In stark contrast, a terrorist event, however, does not follow predictable patterns. In addition, when damage does occur, the damage is purposely designed to be a tail-event, although terrorists, like all humans, occasionally fail, but the cost distribution can be expected to exhibit pronounced kurtosis. Since the events of the September 11, 2001 terrorist attacks, more attention has been focused on the economic consequences of terrorism. This research explores the legal and economic issues of estimating the cost of a terrorist threat. The primary focus of the research concerns a threat to a large public venue such as a convention center/arena. Estimating the cost of a terrorist threat in this context is a multidisciplinary effort involving, at a minimum, economists, accountants, lawyers, and experts on security/terrorism.

Comments

A Thesis Presented to the Department of Economics and the Faculty of the Graduate College University of Nebraska In Partial Fulfillment of the Requirements for the Degree Master of Arts University of Nebraska at Omaha. Copyright Gregory C. Ashley December, 2002.

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