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Terrorism, fear and the impacts on economic rationality

The recent terrorist attacks in Kenya and Pakistan have reinvigorated the worldwide fear of extremist violence. The far-reaching effects of these tragic events have substantial impacts on the way people choose to live their lives. Terrorism induces fear. This natural human reaction causes subjective beliefs and reality to diverge. Exploring the consequences of terrorism is a challenge for economists, especially with regard to the effects on rationality, consumption and economic behaviour.

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