“Tyler Cowen”:http://marginalrevolution.com/marginalrevolution/2011/03/price-elastic-terrorists.html blogs on the decision of an al Qaeda terrorist to attack a target in Detroit rather than Houston or Chicago because the airfare was cheaper. He suggests that “[i]f nothing else, this example plays up how hard it is to understand the motives of terrorists.” But I wonder whether this could be explained by the mixed motivations and opaque finances of terrorist organizations. Jacob Shapiro and David Siegel have a 2007 article making “just this argument”:http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2478.2007.00457.x?journalCode=isqu (paywalled) for why the operations sides of terrorist operations are consistently underfunded.
bq. Shortly after noon on February 26, 1993, approximately 1,500 pounds of homemade explosives were detonated on the second level of the World Trade Center parking structure. Six people were killed and more than a thousand were injured. It could have been much worse; the F-350 Econoline van rented by the terrorists had a cargo capacity of over 4,000 pounds. Ramzi Yousef, the leader of the attack, later testified he did not have enough money to purchase sufficient materials to build a larger bomb…. Yousef ‘s cell in New York was underfunded at a time when Al Qaeda businesses in Sudan were generating enough income to support thousands of followers, run military training camps, and provide large kickbacks to the Sudanese government.
bq. … there is a recurring pattern of financially strapped operatives working for terrorist organizations that seem to have plenty of money. … suppose that the members of a terrorist support network, middlemen, were not uniformly driven by mission accomplishment, but that some were driven by monetary rewards. Because the network is covert, informational asymmetries abound, exacerbating the principal-agent dilemmas found in any hierarchical organization, creating numerous opportunities for middlemen to appropriate resources for personal use. In this scenario a greedy middleman need only pass on as much money to operatives as is required to achieve an acceptable number of successful attacks. This rough sketch, which our model formalizes, can explain underfunding in hierarchical terrorist groups.