The profit motive has led pirates to come up with surprisingly democratic and egalitarian social structures. It is a lesson in bottom-up economics, explains Michael Shermer.
The Invisible Hook: The Hidden Economics of Pirates
- Peter T. Leeson
In recent years, economists have joined the ranks of high-profile scientist writers in publishing thoughtful books intended for both the general public and their colleagues. In works such as Freakonomics by Steven Levitt and Stephen Dubner and Nudge by Richard Thaler and Cass Sunstein, seemingly every aspect of human life is examined from an economic perspective. Peter Leeson's book is a good addition to the genre.
A major theme of such books is that behaviour that seems irrational is in fact rational when economic incentives are considered. Take piracy. In The Invisible Hook, Leeson, an economist at George Mason University in Fairfax, Virginia, argues that acts such as flying the Jolly Roger flag, concocting code rules, and employing forms of punishment are rational responses to the pursuit of profits. Invoking Adam Smith's powerful economic metaphor of the “invisible hand”, Leeson lays bare the structure of pirate societies. Along the way he offers one of the finest introductory courses in economics since Henry Hazlitt's Economics in One Lesson.
The public, Leeson explains, view pirates as “liars, cheaters, and traitors” and pirate society “as orderly and honest as an asylum for the criminally insane ... without a warden”. This attitude is older than the Pirates of the Caribbean films: in 1726, for example, King George I received a petition from “the General Officers of the Army” that pirates were “profess'd enemys to all Order and Government”.
This perception is wrong, according to Leeson. No community can succeed if it is utterly anarchistic. Adam Smith recognized this point a half-century after George I: “If there is any society among robbers and murderers, they must at least ... abstain from robbing and murdering one another.” Leeson argues that pirate life had to be “orderly and honest” to meet its economic goals. These were those of any corporate enterprise: to turn a profit.
Lacking the social structures and political tools of civil society, pirates invented their own. The Invisible Hook shows what pirate order looked like, how it worked, and the incentives needed to maintain it even as they disrupted order on the sea. It is also a lesson on how social structure forms naturally from the bottom up out of economic necessity, instead of from the top down by political fiat. Just as it has been shown that the Wild West of nineteenth-century America was a relatively ordered society, in which ranchers, farmers and miners came up with their own rules and institutions for conflict resolution long before the federal law could reach them, Leeson reconstructs from historical documents how pirate communities did the same thing. Benjamin Franklin allegedly said at the signing of the Declaration of Independence: “We must, indeed, all hang together, or assuredly we shall all hang separately.” Surely some pirate captain conveyed the same sentiments to his crew, perhaps as a warship was bearing down upon them with guns blazing.
Pirates employed forward-looking economic practices. Many pirate ships elected their captains and had a strict set of rules for everyone to follow, placing restrictions on problem activities such as drinking, gambling, sex, desertion and fighting. Pirate sailors were better paid than those in many marine navies, they were more tolerant of racial diversity among crews, employed clearer systems of corporal punishment, and divided the spoils with greater equanimity than their naval counterparts. Shirking one's duties during battle was particularly worthy of punishment because it could lead to the “free-rider” problem where loot was divided evenly between uneven efforts, breeding resentment, retaliation and “an-arrgh-chy”. Pirate codes were specific in their laws and punishments for breaking those laws, to which pirate crews had to consent before sailing.
Leeson tracked down the sharing of contractual arrangements between captains, made possible by the fact that “more than 70 percent of Anglo-American pirates active between 1716 and 1726, for example, can be connected back to one of three pirate captains”, and thus the pirate code emerged from “piratical interactions and information sharing” not from one central pirate king.
Across history, merchant and military navies have themselves hardly been beacons of enlightened liberalism, engaging as they did in questionable practices such as the British, French, and Spanish pillaging of native American resources in the sixteenth and seventeenth centuries, during the heyday of piracy.
Sovereign governments may have legalized such plundering, but they were not necessarily more moral than the pirates who re-plundered that same wealth. Both used the threat of force, as Leeson reminds us. He does not argue for moral equivalency, rather he explains that pirates form their own versions of civil societies for the same reason everyone else does: economic success.
The Invisible Hook is a good addition to the genre of popular economics: a fun and enlightening read, and rock solid in its scholarly bona fides.
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Shermer, M. Orderly anarchists. Nature 460, 176–177 (2009). https://doi.org/10.1038/460176a