These days there aren't many scams bigger than all the fuss we're making about the threat of terrorism coming to our shores.
What makes the scam worse is that we bring it on ourselves.
But I'm not first to point out that this degree of concern is totally out of whack with the actual risk of being attacked.
In the past two decades, just three people have died as victims of terrorist attacks (broadly defined) in Australia. They were the two victims of the Martin Place siege and the NSW police accountant Curtis Cheng.
When Malcolm Turnbull was announcing the formation of the mega Home Affairs department last week, which he insisted was all about improving the domestic security response to "the very real threat of home-grown terrorism that has increased with the spread of global Islamist terrorism", he said that intelligence and law enforcement agencies had successfully interdicted 12 imminent terrorist attacks since September 2014.
There's no way of checking that claim, nor guessing how much harm would actually have transpired, but if that figure of 12 impresses you, you're making my point. Relative to all the other threats we face, it's chicken feed.
Professor Greg Austin, of the Australian Centre for Cyber Security at the University of NSW, has written that more Australians have died at the hands of police, lawfully or unlawfully, in 10 years – at least 50 between 2006 and 2015 – than from terrorist attacks in Australia in the past 20 years.
You reckon terrorism's a great threat? What about the more than 318 deaths from domestic violence just in 2014 and 21015?
The former senior bureaucrat John Menadue has written that Australia's alcohol toll is 15 deaths and 430 hospitalisations a day.
The journalist Bernard Keane says that between 2003 and 2012, there were 2617 homicides and 190 deaths from accidental gun discharges. More than 130 rural workers died from falling off vehicles, 206 died from electrocution and 1700 Indigenous people died from diabetes.
Why do we so greatly overestimate the risk of being affected by terrorism? Many reasons.
Part of it is that, as psychologists have demonstrated, the human animal is quite bad at assessing probabilities. We tend to underestimate big risks (such as getting killed on the road) and overestimate small risks (such as winning Lotto or being caught up in terrorism).
We tend to assess the likelihood of a particular event according to its "salience" – how well we remember hearing of similar events in the past and how much notice we took of them.
Trouble is, most of what we know about what's happening beyond our personal experience comes to us from the news media, and the media focus almost exclusively on happenings that are highly unusual, ignoring the everyday occurrences.
They do so because they know this is what we find most interesting. They tell us more about the bad things that happen than the good things for the same reason.
The media know how worried and upset we get by terrorist attacks, so they give saturation coverage to attacks occurring almost anywhere in the world.
The unfortunate consequence is we can't help but acquire an exaggerated impression of how common terrorist incidents are and how likely it is one could affect us.
But it's not all the media's fault. Of the many threats we face, we take special interest in terrorism because it's far more exciting than boring things like road accidents or people drinking too much.
The other special, anger-rousing characteristic of terrorism is that it comes from overseas and thus stirs one of our most primeval reflexes: xenophobia.
Our response to terrorism is emotional rather than thoughtful. And that leaves us open to manipulation by people with their own agendas.
After the media come the politicians. It's conventional wisdom among the political class that security issues tend to favour the Liberals over Labor. That's why conservative politicians are always trying to heighten our fear of terrorism (see Turnbull above) and why Labor avoids saying anything that could have it accused of being "soft on terror".
After the politicians come all the outfits that make their living from "domestic security" – spooks, policy people, equipment suppliers and myriad consultants – all of them doing what they can to keep us alarmed but not alert.
Domestic security is probably the fastest-growing area of government spending. None of the budget restraint applies to it. That's partly because of public pressure, partly because of the security industry's success in wheedling money out of the pollies, and partly because, should some terrible event ever happen, the pollies want to have proof they tried their best to prevent it.
What's this got to do with economics? Everything. Economics is about achieving the most efficient use of scarce resources.
We face many threats to life and limb and are right to expect the government to do what it can to reduce them. But there's a limit to how much tax we're prepared to pay, and the more money we lavish on the tiny risk of local terrorism, the more we underspend on many far greater risks to our lives.
