It's pretty interesting and I can see how terrorism functions as part of this economy. One of the major goals is to get the attention of your foes, to try and get them to change. It's also an attempt to get the attention of potential supporters, to show that you're doing something to thwart what is generally perceived to be a much more powerful foe.
I'm not sure if one should respond to terrorism by just ignore them, by never saying the identity of who did it, or something along the lines of what we're currently doing. (Though perhaps with less fear mongering).
The problem with ignoring them is they might just act out more, though if society as a whole continued to ignore the terrorists the technique would overall lose effectiveness.