On Rational Choice Theory and the Study of Terrorism

When rational choice theory is applied to the study of terrorism, it is important that attention be given to the derived principles of constrained utility maximization. Particularly useful is the Slutsky equation, which rigorously analyzes the quantity response in one activity to a price change in another. By directing attention to assumptions and/or information about compensated cross price elasticities, expenditure shares, and income elasticities, the Slutsky equation can provide critical guidance in both theoretical and empirical analysis.