Profs Find Interpol’s War on Terrorism Paying Off
Economic Statistical Model Show Agency Gained $200 for Every $1 Spent

Interpol redefined its mission after 9/11 by committing a share of its worldwide resources to combating terrorism — and that effort appears to be paying off in a big way, UT Dallas researcher Dr. Todd Sandler said.

“According to our calculations, Interpol gets about $200 in gain for every $1 it spends on the fight against terrorism,” said Sandler, the Vibhooti Shukla professor of economics and political economy in UT Dallas’ School of Economic, Political and Policy Sciences. “That’s a big payback.”

These findings could affect how individual governments evaluate the return on investment for their own anti-terrorist programs and may encourage greater intelligence cooperation among nations, he said.

“Our findings, taken together, could say a lot to members of Congress as they consider how they should allocate funds for fighting terrorism.”

Dr. Todd Sandler

The study was written jointly with Dr. Daniel G. Arce, professor of economics at UT Dallas, and Dr. Walter Enders, professor of economics at the University of Alabama, and is scheduled to be published in the Journal of Law and Economics in February 2011.

The project looked at anti-terrorism activities within Interpol, also known as the International Criminal Police Organization. The authors gained unprecedented access to the agency’s records and used that data to determine how much money had been devoted to terrorism projects and how successful such efforts were.

The study used 12 alternative scenarios in assessing the value of Interpol’s activities. As economists, the authors sought to evaluate the net economic benefit of having fewer terrorists on the loose.

They considered – and then attached dollar figures – to the number of lives lost, the amount of injuries and the estimated negative impact on a nation’s gross domestic product (GDP) after a terrorist event. They arrived at values based on a variety of sources. After 9/11, for example, the family of each victim killed in the attacks was paid $2 million by the U.S. government.

The authors used different conservative assumptions to get their values and then arrived at an average benefit-cost ratio for the agency. Based on past data, they assumed that the average terrorist event claims 1.1 lives and two to three injuries.

They then used an economic statistical model to account for GDP savings from fewer terrorist events owing to Interpol-assisted arrests by countries’ police forces. They translated arrests into fewer terrorist incidents based on alternative counterfactual assumptions – e.g., one arrest resulted in one fewer incident that year, or the arrest of an average-size attack force of four to six terrorists resulted in one fewer incidents that year. 

The authors tried to ensure they were not overestimating the value of arrests. “If we had to make an assumption, we always lowered the benefit value or erred on the side of higher cost, in order to never overestimate the net payback from Interpol efforts,” Sandler said.

The Interpol budgets for anti-terrorist efforts in 2006 and 2007, the years studied, were $14 million and $17 million, respectively. If the average cost of a terrorist act is $5 million, then the agency needed to prevent only four acts during 2007 to more than pay back the budget cost. Arrests that occurred in cooperation with Interpol far exceeded that number, though the data doesn’t reveal whether any of those arrests would have been made without Interpol’s  cooperation.

Sandler said it was virtually impossible to come up with a conventional benefit measure for the study of Interpol’s success, so they created counterfactual measures, much like what medical researchers use when comparing the effects of a placebo versus a new drug.  They then figured out how many arrests were tied to Interpol’s terrorism fight and how those numbers compared to previous periods, before the funding increase.

The authors’ research looked at the number of arrests based on notices by Interpol, as well as detentions tied to the diffusion of information from one country to another, via Interpol. One of the areas in which Interpol is most effective involves monitoring of lost or stolen travel documents. Many terrorists enter countries on stolen or altered documents, Sandler said. Passports at airports and other entry points now can be screened by a high-tech Interpol system based in France, so it’s much harder for would-be terrorists to pass through with bogus documents.

Even after it was enlarged, Interpol’s anti-terrorism budget still looks minute compared to the budget for the Department of Homeland Security, about $80 billion during the same time period.

Before the devastating attacks of Sept. 11, Interpol concentrated its activities on curtailing drug smuggling, money laundering, counterfeiting and pedophilia-related crimes. Since then, the global police organization has added an emphasis on terrorism, allotting 20 percent to 25 percent of its budget to anti-terrorism programs. Nations that support the agency have increased its overall budget substantially in the last nine years to cover the increased cost.

Interpol has 188 member countries, though some nations do not cooperate fully in its activities. The organization has agents, but they don’t make arrests. Instead, Interpol coordinates information and operations among nations, to allow countries to track criminals across borders and share information of common interest.

“We got access to excellent data from Interpol because the secretary-general had read a story about our previous research on global anti-terrorism efforts after 9/11 in The Economist,” Sandler said. “His staff then emailed me and offered to provide some real numbers to enable us to do a similar study of Interpol.”

The research was funded by grants from the U.S. Department of Homeland Security and was not paid for by Interpol.

In the authors’ earlier research, they found individual governments tended to get less impressive returns on their terrorism-fighting investments. A 2008 project found that increasing homeland security worldwide by 25 percent resulted in a payback of about 30 cents on a dollar. Increased offensive measures such as those taken against the Taliban in Afghanistan after 9/11 offered a payback of 8 to 12 cents on the dollar.

Interpol’s cooperative-based proactive measures leading to the arrest of terrorists or prevention of movement among countries also do not have the same potential for backlash attacks that military actions sometimes spur. “Our findings, taken together, could say a lot to members of Congress as they consider how they should allocate funds for fighting terrorism,” Sandler said.

“Quite simply, Interpol presents large paybacks on small expenditures as it addresses the shortfall of collective proactive measures,” the authors wrote in their upcoming article. “This is a smart way to fight transnational terrorism.”

Dr. Todd Sandler (left) collaborated on the project with Dr. Daniel G. Arce, also a UT Dallas economics professor and researcher.

Media Contact: The Office of Media Relations, UT Dallas, (972) 883-2155, [email protected].

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