Terrorism, Skyjacking &
Embezzlement
Foreign and Domestic
Llad Phillips
1
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
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Post 9-11
 Attack
–
–
–
–
–
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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?
3
US Wars
 Domestic
(over here)
– independence
– 1812
– Civil
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 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
4
Why were we not Prepared?
Theme #1: “Over there… “
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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.
5
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, ….
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Terrorism in the USA
 Home
grown
 Foreign imports
 Remedies
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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)
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8
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
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Learning from Economics
 Thwarting
embezzlement
– inspection, I. E. audit
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Recent History of US
Terrorism
 Bombings
– World Trade Center, New York
6
killed, 1000+ injureed
– Murtaugh Federal Building, Oklahoma City
– Black Churches
 Skyjackings
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WTC 1993
Blackhawk Down 1993
Saudi Arabia 1996
Africa 1998
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USS Cole 2000
9/11
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Reward: $2,000,000
http://news.bbc.co.uk/onthisday/hi/dates/stories/february/26/newsid_2516000/2516469.stm
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Facts:
My
Lecture
# 7 On
Corrections
Bureaucracy
“corrected”
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Total International Terrorist Attacks
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http://www.state.gov
Office of the Coordinator
for Counter-Terrorism
Patterns of Global Terrorism
18
Note: The
Small # of
Attacks in
North
America
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Shock value
Of 9/11
Few attacks
In North
America, but
Many
Casualties
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Year
22
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
Number
Actual and Attempted Bombings in the US
.
3500
3000
2500
2000
1500
1000
500
0
Casualties from Bombings, US
.
10000
Injured
Killed
Number
1000
100
10
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1
Year
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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
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1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
1958
1955
1952
1949
1946
1943
1940
1937
1934
1931
Number
Skyjackings Involving US Civil Aviation
.
40
35
30
25
20
15
10
5
0
Year
25
The Legend of D. B. Cooper
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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
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Airline Passengers Screened, in Millions, US
.
1400
1200
Millions
1000
800
600
400
200
Year
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1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
0
Firearms Detected From Screening Airline Passengers, US
.
4000
3500
3000
Number
2500
2000
1500
1000
500
Year
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30
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
0
Explosive Devices Detected From Screening Airline Passengers
.
1000
Number
100
10
Year
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1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1
Skyjackings: Foreign and Domestic
.
60
50
US
Foreign
Number
40
30
20
10
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
0
Year
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US Versus Foreign Skyjackings
.
40
35
1972
30
25
1968
US
1980
20
1983
15
10
1961
5
1990
1973
0
0
10
20
30
40
50
60
Foreign
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Domestic Vs. Foreign Skyjackings and the Security Act of '73
40
.
1969
US
35
Fitted
1972
30
US
25
1968
20
15
10
5
1990
1973
0
0
10
20
30
40
50
60
Foreign
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Model of US Skyjackings and Bomb Threats
Terrorism
Foreign
Skyjackings
US
Skyjackings
2 Year Lag
Bomb Threats
to US Aircraft
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Inspection
35
Bomb Threats to US Aircraft
.
2500
2000
Number
1500
1000
500
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
0
Year
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Bomb T hreats To US Aircraft Vs.
Foreign Skyjackings (Lagged T wo Years)
.
2500
Bomb Threats
Fitted
2000
Number
1500
1000
500
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
0
Year
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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
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Year
39
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
Rate
US Arrests for Embezzlement Per 100,000 Population
.
7
6
5
4
3
2
1
0
Defense Against Embezzlement and Skyjacking
I. Options for choice: States of the world
Firm
Audit
No
Embezzle
E A
E Â
Not
Ê A
Ê Â
Employee
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Defense Against Embezzlement and Skyjacking
II. Valuation of the options, i.e. choices
A. Payoffs to the employee
Embezzle
Not
B. Payoffs to the firm
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Audit
No
-
G
0
0
Audit
No
Embezzle
-C
-L
Not
-C
0
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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
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+
Payoff to the Firm
-
Ê Â
+
Payoff to the Employee
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+
Payoff to the Firm
Ê Â
-
+
Payoff to the Employee
-C
Ê A
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+
Payoff to the Firm
Ê Â
-
-
E A
+
Payoff to the Employee
-C
Ê A
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+
Payoff to the Firm
Ê Â
-
-
E A
G
-C
+
Payoff to the Employee
Ê A
-L
E Â
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+
Payoff to the Firm
Ê Â
-
-
G
-C
E A
+
Payoff to the Employee
Ê A
-L
E Â
Probability of audit = 1
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Probability of Audit = 0
47
Firm Can Choose A Probability
Of Audit Between 0 and 1
1, then employee loses - 
 If PA = 0, then employee gains G
 How about a probability between 0 and 1
like G/( + G)
 If PA =
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+
Payoff to the Firm
Ê Â
-
-
G
-C
E A
+
Payoff to the Employee
Ê A
-L
Probability of audit = 1
E Â
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Probability of Audit = 0
49
Defense Against Embezzlement and Skyjacking
Keep Your Adversary Guessing
Expected Payoff to the employee
Embezzle: PE
Not: 1- PE
Audit:
PA
No:
1 - PA
-
G
0
0
PE PA(- ) + PE(1 - PA) G = 0 = No Incentive
PA(- ) + PA(- G) + G = 0 = PA(  + G) - G
PA = G / (+ G)
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Reaction Curve of the Employee to the Firm
1.0
PE
0
G/( + G)
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PA
1.0
51
Reaction Curve of the Employee to the Firm
1.0
PE
0
G/( + G)
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PA
1.0
52
Reaction Curve of the Employee to the Firm
1.0
PE
0
G/( + G)
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PA
1.0
53
Reaction Curve of the Firm to the Employee
VF = PEPA(-C) +(1-PE)PA(-C) + PE(1-PA)(-L)
1.0
PE
C/L
0
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0
PA
1.0
54
Reaction Curve of the Firm to the Employee
VF = PEPA(-C) +(1-PE)PA(-C) + PE(1-PA)(-L)
1.0
PE
C/L
0
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0
G/(G+
PA
1.0
55
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Post 9-11
 Attack
–
–
–
–
–
Llad Phillips
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?
57