The End Of Al-Qa`ida : Rationality, Survivability and Risk Aversion

Along with such factors as declining support, the dismantling of the leadership group and transition into legitimate political engagement there is another factor that is relevant to the decline and fall of terrorist groups. This is the group’s risk aversion. This aspect of the terrorist group’s profile, which shapes the way in which it makes decisions under conditions of risk, relates crucially to its evolutionary stability and longevity. In fact, it may play a more important role than ‘rationality’. Terrorist groups must compete for a share of the available ‘political influence’ and violent groups do so by competing for a share of ‘inflicted fatalities’. Differential rates of accumulation determine the differential significance of some individuals and groups over others. Terrorist groups with logarithmic utility functions will exhibit longevity because logarithmic utility maximization naturally equates with the maximization of the growth rate of the share of inflicted fatalities and political influence. Terrorist groups with non-logarithmic utility functions will see their significance decline. The study of risk aversion has implications for the prediction from microeconomic theory of which terrorist groups will survive in the long run. The analysis presented herein computes a value of 0.56 for Al-Qa`ida’s relative risk aversion coefficient. This value is too low to be consistent with logarithmic utility