It is fashionable to criticize economic theory for focusing too much on rationality and ignoring the imperfect and emotional way in which real economic decisions are reached. All of us facing the global economic crisis wonder just how rational economic men and women can be. Behavioral economics...

We examine how the theory of deterrence differs from a Cold-War type of setting to a War-on-Terror type of setting. Our central conclusion is that deterrence of terrorist states should resemble Cold War deterrence. Deterring terrorist groups is more difficult. In either case, failure of...