Quote Originally Posted by Rank amateur View Post
The problem with price is that it's a function of supply and demand. High price could indicate few people willing to plant them (low supply) or that AQI has a lot of money and a lot of IEDs. (high demand.)
R.A.,

Price can in fact serve as a measure of the capability and desire to engage in the insurgency.

You have half of it when you state that high price indicates low supply. Assuming that AQI has a fair amount/'excess amount' of money (a reasonable assumption since we are targeting the money supply of AQI) does not mean however that the supply of people willing to do this type of work (the issue that we are measuring) is limited.

http://counterterrorismblog.org/ please see 'Extremism's Deep Pockets' by Michael Jacobson as just one open source example of the tactic of targeting funding)

The demand function can be described mathematically as:

Qd=a +bP+cM+dPr+eT+fPe+gN

Where
Qd = Quantity Demanded
P= Price of the Good or Service
M=Consumer Income
Pr=Price of Related Goods or Services
T=Taste Patterns of Consumers
Pe=Expected Price of the Good in Some Future Period
N=Number of Consumers in the Market
a = Intercept Parameter (when P,M,Pr,T,Pe, and N all equal zero)
b,c,d,e,&f are slope parameters.

So let's check our equations prediction (low supply = high demand) against an in-country observation.

Given a state of ~XX% unemployment in your country (which includes you 'Joe-Iraqi') your family asks you (the patriarch) when water, food, and shelter will be purchased (electricity is out again, your food spoiled in yesterdays 125F heat, the cities pumps have not delivered water to your home, the markets are closed due to security concerns, and you and your family can't stay in your house due to security issues). You know that you will need to pay XX dollars to get your family through Y time.

What do you do? Your choices include:

a) Food/Water/Shelter is available so you do not have to participate (you obviously live in America - Lucky You!). b) Sell your possessions. c) Ask your tribe or militia to help you out yet again. d) Join the local CLC/Iraqi Army and hope the American funding continues and retribution does not come to you or your family. e) leave the country f) Participate in smuggling, crime, etc. g) Take X dollars to shoot at the infidels. h) Take XX dollars to plant an IED. i) Take XXX dollars to act as lookout for an IED attack. j) Take XXX dollars to push the IED trigger.

Supply and Demand are metrics which can be used to measure the insurgency. The 60,000 dollar question is how accurate are the estimates for the variables used in the model.

Steve