In the aftermath of the terrorist attacks of September 11, two models of government response dominated public discussion. One model vests the criminal justice system with the authority to combat terrorism. The FBI and local authorities track down the terrorists; lawyers prosecute and defend them in courts; judges and juries try them; prisons await them. If terrorists or their associates reside abroad, American officials apply for extradition under existing treaties. Another model vests the military with the authority to combat terrorism. While the military pursues terrorists overseas, local officials exercise emergency powers to detain, search, and interrogate. The government does not so much punish the terrorists as disrupt their networks, harass their supporters, and defeat them on the field of battle. Authorities may use propaganda and censorship, and may abrogate civil liberties to a limited extent.
A third model of government response to terrorism has received less attention. This model views terrorist threats as risks to public health and safety, risks that call for a bureaucratic response. Unlike the military and law enforcement models, the third model the regulatory model, focuses on the need for long-term reform of regulatory agencies, such as OSHA, EPA, and FDA.
Regulatory agencies have jurisdiction over countless activities vulnerable to, or related to, terrorist attacks, and they have increased their counterterrorist regulatory activity dramatically in the months since September 11. OSHA has issued guidelines for the handling of mail that potentially contains anthrax spores. (1) FAA is evaluating new security standards for airports. (2) Bank regulators have cracked down on financial institutions used by terrorists to launder money. (3) EPA and DOE have reappraised the security needs of utilities, factories, and shipping companies that handle hazardous materials. (4) FDA and CDC have taken a new look at the supplies of antibiotics and vaccines. (5)
Much regulatory activity, however, predates September 11. A recent GAO report describes earlier preparations undertaken by government agencies, focusing on coordination among federal agencies and with state and local agencies, and the development of response teams designed to contain an attack involving weapons of mass destruction. (6) GAO has paid less attention to more humdrum regulatory efforts to make workplaces, buildings, bridges, tunnels, dumps, and other locations more secure against terrorist attack, although the security of computer networks and air travel has received scrutiny.
The regulatory model, then, is not an innovation; it describes a longstanding element of the government's response to the threat of terrorism. It thus deserves more public and academic attention than it has received. (7) This Article examines the regulatory model, with special attention paid to the ways this model illuminates the problem of fear and mass panic provoked by terrorist attacks. I will emphasize the difference between using regulation to minimize risks that people fear, and using regulation to reduce fear. Both are difficult, but the latter is more ambitious and offers the most hope for undermining the use of terror to achieve political objectives.
PRELIMINARIES: TERRORISM AND TERROR
[T]errorism [is] a distinctive mode of unconventional psychological warfare aimed ultimately at bringing about a climate of fear and collapse in an incumbent regime or target group. (8) The regulatory model invites one to draw analogies between terrorism and other sources of risk. Manufacturing processes pose risks to workers; OHSA obliges employers to take health and safety precautions. Factory pollution creates health risks for nearby residents; EPA obliges factories to install scrubbers or clean up spills. If these analogies hold, then agencies should recognize that terrorism poses similar risks to the health and safety of American citizens. Although the terrorists themselves are often out of reach, agencies can require manufacturers, trucking companies, railroads, hazardous material storage facilities, airlines, and other businesses to take precautions that minimize the risks to consumers, workers, bystanders, and other individuals.
In some ways, these analogies are simple. OSHA's decision whether to regulate the handling of marl is similar to its decision whether to regulate the handling of hazardous chemicals. If the risk of contracting anthrax or another disease or injury from handling mail is high enough, and if employers do not have sufficient incentives to protect their employees, then OSHA might have reason to regulate mail rooms. The risk posed by terrorist attack is not in relevant respects different from the risk posed by dangerous machinery or pollution, and the appropriate regulatory response is well understood.
In other ways, however, the analogies are more complex. Although terrorist attacks can kill and injure thousands of people and cause immense damage to property, the essence of terrorism, as the name implies, is not destruction but terror. Destruction is a means to the end, and the end is a psychological effect. Terrorists use terrorism in order to demoralize the citizens and public officials of the target nation and to promote their own political goals. Because the terrorists' weapon is fear, the regulatory response to terrorism must make fear the object of special concern.
The central role of fear in the regulatory response to terrorist risks does not make the regulatory model false. Rather, it directs attention to existing regulatory activities that take special account of public fear. One thinks of the regulation of nuclear power plants, toxic waste dumps, carcinogenic pesticides, and air travel. Experience with the regulatory response to fear provoked by these activities provides insights that can be used in formulating a regulatory response to terrorism.
The remaining Parts of this Article discuss three areas of regulation that demand reappraisal in light of the threat of terrorism: cost-benefit analysis, regulatory interventions, and institutional reform.
EVALUATING REGULATIONS USING COST-BENEFIT ANALYSIS
The Nature of Fear
Fear is a complex psychological phenomenon, and it sits uneasily with the rational actor premises of standard accounts of risk regulation. One can, without fear, recognize a danger, appraise the risk, and take steps to minimize the risk; this is a purely cognitive response. But a person confronted by a danger frequently has an involuntary emotional reaction. The fearful person experiences a narrowing of attention toward the threat and a disagreeable feeling that he can alleviate only by yielding to the urge to flee.
Although the psychology of fear remains mysterious, some things about fear are relatively well understood. (9) First, a fearful person typically misperceives, or acts as though he misperceives, the magnitude of the risk. Fear interferes with normal Bayesian updating: one can feel fear about, and react disproportionately to, a threat that carries with it small probability of harm. People also treat different but equally frightening risks as though they were the same. (10)
Second, a fearful person has, as observed above, a strong desire to withdraw from the threat. One can think of this desire more formally as a "hedonic cost" that people are willing to pay to avoid. From a normative, cost-benefit perspective, the existence of fear raises the question of whether the government should devote resources to eliminating or reducing fear on the ground that it constitutes a welfare loss. This possibility can be contrasted with the normal practice of using regulation to reduce risks to life, health, safety, and property, not to alleviate directly unpleasant mental states.
Third, fear is contagious: one person can become fearful upon observing that another person is fearful. (11) We talk of bank panics and food safety scares. Although it is rational to withdraw your money from an uninsured bank if other depositors are withdrawing their money, in a real bank panic people are...