Economic investment has merit, but has you stated Pakistan (and Bangladesh) are already in an upward trend economically. I think our bias isn't being military focused, but rather our bias is a few bombs go off in a country and there are some insurgents/terrorists in their midsts, so we assume the country is a basket case, and that is far from the reality. The majority of Pakis don't want anything to do with the extremists.

I think we already invest enough in Pakistan, and we encourage economic growth by providing technical expertise to assist them. The issue is diversifying the wealth distribution, but that needs to be tied to some sort of behavior change by the tribes in the FATA.

I think you hit the main issue and that is their relationship with India. If we could cool the flames between India and Pakistan (it may take a Christmas miracle), then both countries could direct more attention on their internal troubles. They're both allies, so like Egypt and Israel, we have to balance our aid to both to avoid the perception we're picking a side.

Economic incentives are not enough to quiet the radical voices of discontent. Saudi Ariabia is an example where radicals emerge from the middle class. Poverty may assist their propaganda campaign, but it isn't the reason that terrorists become radicals.