Chapter 3
The Greedy Terrorist: A Rational-Choice Perspective on Terrorist
Organizations’ Inefficiencies and Vulnerabilities
Jacob Shapiro
1
Introduction
This chapter uses a rational choice approach to examine the political economy of terrorist
financing. To date, much of the theoretical literature and almost all of the government-sponsored
reports literature discuss terrorist organizations as though they are made up of ideologically
driven purists who share a uniform commitment to the cause. This assumption is needed to
explain how these organizations can both: (1) efficiently distribute funds; and (2) operate
covertly without the checks and balances most organizations require. Upon closer inspection, one
often sees substantial differences in the preferences of key players in terrorist networks. Two
selection processes explain why these differences exist and a principal-agent framework shows
how these differences lead to inefficiencies in terrorist financial systems. Terrorist organizations
face a trade-off between the inefficiency and employing strategies that create vulnerabilities.
Government can undertake specific actions to make this trade-off more problematic.
A
CCOUNTABILITY
With all due respect, this is not an accounting. It’s a summary accounting. For
example, you didn’t write any dates, and many of the items are vague. The
analysis of the summary shows the following:
1–You received a total of $22,301. Of course, you didn’t mention the period over
which this sum was received. Our activities only benefited from a negligible
portion of the money. This means that you received and distributed the money as
you please....
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Convention