The Financial Market Impact of 9/11 and Risk Mitigation Policy on Transportation

Abstract

The adverse economic impact from terrorism has its roots in fear, uncertainty, and lack of order. The concept of insecurity being at the root of poor economic results is an old one. In his 1651 masterpiece Leviathan, Thomas Hobbes argued that man in his natural state lives in a warlike state of nature that is “solitary, poor, nasty, brutish, and short.”1 However, this state is not in man’s best interest. Conversely, security can provide the framework for economic growth. According to Hobbes, mankind forms a peaceful society by entering into a social contract beneath an authority. Individuals cede enough of their natural rights for the authority to be able to ensure internal peace and common defense. To Hobbes, the authority should be a Leviathan with absolute authority. In this worldview, the economic well-being and safety offsets the loss of so many rights to the Leviathan. Hobbes’s work came at a time when civil war was ending in his native England and when Western Europe had only caught up with the living standards of the early Roman Empire (27BCE to around 200BCE). Recent research by Temin shows that the standard of living of the early empire was similar to that of Western Europe in the seventeenth and eighteenth century just before the Industrial Revolution. Temin credits this to moderately stable political conditions and markets for goods, labor, and capital. These conditions worsened in the later Empire and practically collapsed during the dark ages.2