Terrorism, Skyjacking & Embezzlement

1. Terrorism, Skyjacking & Embezzlement Foreign and Domestic

2. Points About Terrorism • Definition: The killing and injuring of innocent civilians for political purposes • The perceived threat from foreign terrorists to the USA (at home) is relatively new (since 9/11) • Earlier skyjackings in the US were not by terrorists • Terrorism has been a threat since World War II in Europe, much of it connected to the Middle East • We can learn from comparing the US reaction to skyjacking, and attempts to control it

3. Attack what how where when why? Why don’t our enemies love us? Defense (focus) what how where when why were we not prepared for the attack? Post 9-11

4. Domestic (over here) independence 1812 Civil Foreign (over there) Mexico: Halls of Moctezuma Spanish: San Juan Hill & Manila Bay WWI: France WWII: North Africa, Europe, Pacific Korea Vietnam Gulf: Desert Storm Afghanistan and Iraq US Wars

5. Why were we not Prepared?Theme #1: “Over there… “ Chorus Over there, over there, Send the word, send the word over there - That the Yanks are coming, The Yanks are coming, The drums rum-tumming Ev'rywhere. So prepare, say a pray'r, Send the word, send the word to beware. We'll be over, we're coming over, And we won't come back till it's over Over there.

6. America’s Best Known World War I Song • “Over there, over there, send the word, send the word over there, that the yanks are coming, ….

7. Terrorism in the USA • Home grown • Foreign imports • Remedies

8. Over There • There have not been very many politically motivated attacks by foreign terrorists on the domestic USA until 9-11 • World Trade Center ( Feb. 26, 1993)

9. Learning from History • Skyjacking in the USA • first in the USA was 1961 • in contrast to skyjackings abroad, at most one skyjacking at home was, maybe, politically motivated by a someone with connections to the Balkans

10. Learning from Economics • Thwarting embezzlement • inspection, I. E. audit

11. Recent History of US Terrorism • Bombings • World Trade Center, New York • 6 killed, 1000+ injureed • Murtaugh Federal Building, Oklahoma City • Black Churches • Skyjackings

12. WTC 1993 Blackhawk Down 1993 Saudi Arabia 1996 Africa 1998

13. USS Cole 2000 9/11

15. Reward: $2,000,000

16. http://news.bbc.co.uk/onthisday/hi/dates/stories/february/26/newsid_2516000/2516469.stmhttp://news.bbc.co.uk/onthisday/hi/dates/stories/february/26/newsid_2516000/2516469.stm

17. Facts: My Lecture # 7 On Corrections Bureaucracy “corrected”

18. Total International Terrorist Attacks http://www.state.gov Office of the Coordinator for Counter-Terrorism Patterns of Global Terrorism

19. Note: The Small # of Attacks in North America

20. Shock value Of 9/11 Few attacks In North America, but Many Casualties

24. Skyjackings • The first skyjacking was a Peruvian carrier in February 1931 • The first skyjacking of a US carrier was a National Airlines flight destined for Key West Florida on May 1, 1961

26. The Legend of D. B. Cooper

28. US Response to Domestic Skyjackings • Armed Federal Marshals on Flights • mostly on flights on the Eastern seaboard corridor • Congress Passes the US Civil Aviation Security Program in 1973

35. Model of US Skyjackings and Bomb Threats Terrorism Foreign Skyjackings US Skyjackings 2 Year Lag Bomb Threats to US Aircraft Inspection

38. Borch Model of Inspection • Two actors • employee(embezzler) & firm • skyjacker & airport security • Two sets of values or payoffs to the outcomes • No dominant strategy for either actor • Need to keep your adversary guessing • Embezzler’s expected outcome: break even • Firm’s expected outcome: dead-weight cost of inspection

40. Defense Against Embezzlement and Skyjacking I. Options for choice: States of the world Firm No Audit E A E Â Embezzle Employee Ê A Ê Â Not

41. Defense Against Embezzlement and Skyjacking II. Valuation of the options, i.e. choices A. Payoffs to the employee Audit No -  G Embezzle 0 0 Not B. Payoffs to the firm Audit No - C - L Embezzle - C 0 Not

42. Circular Contest • Best outcome for the employee • embezzle and no audit • Best outcome for the firm • no embezzling and no audit • Worst outcome for the employee • embezzle and get audited • Worst outcome for the firm • don’t audit and get embezzled

43. + Payoff to the Firm Ê Â - + Payoff to the Employee -

44. + Payoff to the Firm Ê Â - + Payoff to the Employee - C Ê A -

45. + Payoff to the Firm Ê Â - + -  Payoff to the Employee - C E A Ê A -

46. + Payoff to the Firm Ê Â - + -  G Payoff to the Employee - C E A Ê A - L E Â -

47. + Payoff to the Firm Ê Â - + -  G Payoff to the Employee - C E A Ê A - L E Â Probability of audit = 1 - Probability of Audit = 0

48. Firm Can Choose A Probability Of Audit Between 0 and 1 • If PA = 1, then employee loses -  • If PA = 0, then employee gains G • How about a probability between 0 and 1 like G/( + G)

49. + Payoff to the Firm Ê Â - + -  G Payoff to the Employee - C E A Ê A - L Probability of audit = 1 E Â - Probability of Audit = 0

50. Defense Against Embezzlement and Skyjacking Keep Your Adversary Guessing Expected Payoff to the employee Audit: PA No: 1 - PA -  G Embezzle: PE 0 0 Not: 1- PE PE PA(- ) + PE(1 - PA) G = 0 = No Incentive PA(- ) + PA(- G) + G = 0 = PA(  + G) - G PA = G / (+ G)