A couple of months ago, I got in the mail a review copy of a then-forthcoming book. I usually don't focus much on such copies (unless they're science fiction or fantasy, or unless they're by someone whose work I know and like), but this one grabbed my interest from the outset. I read it and much enjoyed it, and decided that I had to have the author guest-blog about the subject. The book is now out, and I'm delighted to report that the author will be with us this week to discuss it.
The author, Peter Leeson, is an economics professor at George Mason University, and the author of more than 60 academic journal articles analyzing a wide range issues in political economy and law and economics. And the book is The Invisible Hook: The Hidden Economics of Pirates, which uses basic economic theory to explain and explore infamous pirate behaviors. (We're talking the 1700s "Arrrh!" pirates, the cool and romantic ones that are safely in the past, not the modern ones that are actually a danger to us today, though the author briefly touches on the modern pirates near the end.) Here's a summary of the book from Princeton University Press:
Pack your cutlass and blunderbuss — it's time to go a-pirating! The Invisible Hook takes readers inside the wily world of late seventeenth- and early eighteenth-century pirates. With swashbuckling irreverence and devilish wit, Peter Leeson uncovers the hidden economics behind pirates' notorious, entertaining, and sometimes downright shocking behavior. Why did pirates fly flags of Skull & Bones? Why did they create a "pirate code"? Were pirates really ferocious madmen? And what made them so successful? The Invisible Hook uses economics to examine these and other infamous aspects of piracy. Leeson argues that the pirate customs we know and love resulted from pirates responding rationally to prevailing economic conditions in the pursuit of profits.
The Invisible Hook looks at legendary pirate captains like Blackbeard, Black Bart Roberts, and Calico Jack Rackam, and shows how pirates' search for plunder led them to pioneer remarkable and forward-thinking practices. Pirates understood the advantages of constitutional democracy — a model they adopted more than fifty years before the United States did so. Pirates also initiated an early system of workers' compensation, regulated drinking and smoking, and in some cases practiced racial tolerance and equality. Leeson contends that pirates exemplified the virtues of vice — their self-seeking interests generated socially desirable effects and their greedy criminality secured social order. Pirates proved that anarchy could be organized. Revealing the democratic and economic forces propelling history's most colorful criminals, The Invisible Hook establishes pirates' trailblazing relevance to the contemporary world.
Private Law and Order: Somali Pirate Edition
As I discuss at length in The Invisible Hook, those pop-culture phenoms, the pirates of old, had a well-developed system of private law and order. Early 18th-century pirates created rules that prohibited violence and theft; regulated gambling, smoking, and drinking; and established procedures for selecting officers of these laws’ enforcement. The result was surprisingly orderly and cooperative early 18th-century pirate societies.
However, until recently, these sea dogs’ Somali successors showed little discernable social organization. In large part this is because they didn’t form societies. There weren’t enough Somali pirates, nor did they spend enough time together plying their illicit trade, to constitute a group (or groups) requiring law and order.
But times for the Somali pirates, they are a changing. Over the last year or so Somali piracy has flourished into a full-blown economic activity in some of Somalia’s coastal communities. Somalia’s modern sea bandits pirate full time; and while they spend little time together on their ships, they spend significant time together in their pirate communities on land. A new, albeit different, pirate society is being born.
Pirates thus face a governance problem they haven’t faced since, well, the 18th century. And they’re rising to the occasion. Somali sea dogs have a code of conduct that includes rules for dealing with inter-pirate theft, conflict, and theft from their victims.
According to one Somali pirate, for example, “If any one of us shoots and kills another, he will automatically be executed and his body thrown to the sharks.” Further, this pirate added, “If a pirate injures another, he is immediately discharged and the network is instructed to isolate him. If one aims a gun at another, he loses five percent of his share of the ransom.”
According to another Somali sea dog, “Anybody who is caught engaging in robbery on the ship [the pirates overtake] will be punished and banished for weeks. Anyone shooting a hostage will immediately be shot.” “I was once caught taking a wallet from a hostage. I had to give it back and then 25,000 dollars were removed from my share of the ransom.”
The Somali pirates’ “laws” are enforced by a “mobile tribunal,” a kind of traveling pirate court, that oversees relations between the significant number of Somali “pirate cells”— separate but coordinated bands of sea scoundrels that dot Somalia’s coastline.
There remain important differences between 18th century- and modern Somali-pirate governance. These differences reflect the different, specific governance needs of each kind of pirate’s community. For example, it was important for early 18th-century pirates to regulate smoking because of the significant negative externality one pirate’s unrestricted tobacco use could impose on his partners in crime. Early 18th-century pirate ships were made of wood and cloth and carried large quantities of gunpowder. A careless pirate smoker was thus liable to destroy the ship or, worse yet, blow the crew to smithereens.
Modern pirating vessels, in contrast, are metal, and aren’t carrying gunpowder. One pirate’s smoking behavior poses a much smaller risk to the rest of the crew. And on land, where modern pirates spend the majority of their time together, smoking presents no such risk to others. Somali pirates, then, don’t need to create rules governing tobacco use in their society; so they don’t.
Similarly, given their unique governance needs, Somali pirates have private institutions of law and order that 18th-century pirates didn’t have, such as their traveling court. Since Somali pirate organization involves the cooperation of numerous and geographically separated groups, Somali pirates require a mobile judiciary that can oversee conflicts and enforces pirate law “industry wide.”
In contrast, early 18th-century pirate societies were floating ones--those aboard their ships. They operated as independent units rather than as part of a coordinated whole together with all of the other pirates in the Caribbean. Eighteenth-century pirates therefore had no need for a traveling court. Each crew resolved its disputes on board via an officer called the quartermaster whose judicial authority extended only over the members of his crew.
Private pirate law and order is alive and well in allegedly “lawless” Somalia, and highlights two important lessons. First, even outlaws require social order and private governance institutions emerge to create this order when government does not. Second, when they emerge endogenously, as in do pirate societies, these governance institutions develop to reflect the particular needs of the individuals they govern. The resulting effectiveness of such institutions is certainly part of the reason for 18th-century pirates’ success. I suspect the private governance institutions that support the Somali pirates’ criminal economy deserve considerable credit for these sea dogs’ success so far too.
The Market Has Spoken
Despite the surge in Somali piracy and encouragement from some employees of the U.S. government, commercial ships aren’t choosing to put armed guards on their vessels. And with good reason: given present conditions, anyway, it’s a bad idea.
As I discuss in The Invisible Hook, like their Caribbean forefathers, Somali pirates are in the business of making money, not harming hostages. Of the 815 hostages Somali pirates took last year, only four died and two were injured under pirate care.
Pirates aren’t treating hostages well because they’re nice guys. They’re treating hostages well because it pays to do so. A dead hostage fetches no ransom and pirates’ business model would collapse if they injured prisoners or allowed them to die. The economics of piracy has a simple bottom line: for all the problems piracy may pose, the threat of dead and injured innocents isn’t one of them.
That could change, however, if commercial ships starting carrying armed guards on their ships. Armed guards will of course defend against pirate attacks, potentially leading to fire fights that could jeopardize innocent sailors’ lives. The prospect of having to battle for their prizes will deter some pirates. But others will remain undeterred. And for the remaining industry, armed guards’ effect may very well be to increase the dangers that piracy poses rather than reducing them.
The profit-driven behavior of commercial shippers corroborates this possibility. Like pirates, commercial shippers also have strong incentives to keep merchant sailors alive and well: insurance costs. If armed guards reduced the dangers of piracy instead of increasing them, commercial shippers’ insurance costs would fall by employing guards instead of rising. But in this case commercial shippers would have hired armed guards already, which they haven’t. Commercial shippers don’t need government to encourage them to undertake the most profitable course of action.
The market has spoken: Even in today’s pirate-infested waters off Somalia, the low probability of being captured by pirates, together with the fact that pirates release their hostages unscathed, means it’s cheaper--and safer--to go without armed guards.
A Preposterous Suggestion: Of TJ, Pirates, and America's Founding
In the course of doing interviews on The Invisible Hook over the last several weeks I’ve had a number of people ask me if I thought America’s Founding Fathers might have been influenced by early 18th-century pirates in framing the United States government.
Before you laugh, let me explain . . .
In the book I analyze early 18th-century pirates’ system of social organization, the basic principles of which are, in several important respects, I suggest quite similar to those of our own.
The centerpiece of pirate governance was a system of constitutional democracy. Before launching a plundering expedition, each crew drew up a written document that stipulated the rules that would govern its members while the pirates remained together. These “articles” also empowered the chief pirate officer--the quartermaster--to enforce the rules, administer proscribed punishments, divide the booty, and so forth. Critically, by making many of these terms explicit, pirate constitutions not only empowered the quartermaster in these duties but also constrained him. He was not free divide plunder anyway he saw fit, for example, arbitrarily bestow social insurance payments on pirates he liked (pirates had an early system of workers' comp), or punish lawbreakers willy-nilly.
In addition to such “constitutional checks” on the quartermaster, pirates also exerted democratic checks on his behavior. Pirates popularly elected the quartermaster and could, and did, democratically remove quartermasters who overstepped their bounds or otherwise acted in ways at odds with the other crewmembers’ interest.
The quartermaster also exercised his authority within the context of a system of piratical separation of powers. While the quartermaster wielded command in cases such as those described above, he wielded no command in times of conflict with potential prizes. Authority in these cases fell to the captain, the other central pirate officer, who pirates also democratically elected and deposed. Notably, pirates’ democratic mechanism for this and other purposes was also established in their constitutions.
The chief pirate officers--the captain and quartermaster--not only had countervailing authorities, they also competed with one another. When pirates deposed an ineffective or otherwise unsuitable captain from command, they could, and sometimes did, elect the quartermaster to this post in his place.
Further, in some cases pirate crewmembers exercised a kind of “judicial review” authority. Where their articles were unclear or silent on certain matters, pirates gathered to interpret and apply the ship’s constitution to the case at hand.
Many of the fundamental features of pirate’s governance system should sound familiar to those acquainted with America’s governance system. They’re not the same, of course. But several of the basic institutions appear to be there, albeit in more rudimentary form.
Perhaps even more strikingly, the basic reason behind pirates’ system of checks and balances is fundamentally the same reasoning behind our system of checks of balances: to simultaneously empower and constrain those we endow with the authority to rule over us.
To keep their criminal enterprise from breaking down, pirates needed “leaders” who could maintain order among them and make certain decisions on behalf of the whole (such as during battle), but could also be prevented from abusing the power crewmembers vested in their hands for this purpose. Pirates were especially wary of this possibility, most of them having formerly sailed as legitimate sailors under the autocratic, and thus often abused, authority of merchant ship captains.
As one pirate put it, “Most of them having suffered formerly from the ill-treatment of Officers, provided thus carefully against any such Evil now they had the choice in themselves . . . for the due Execution thereof they constituted other Officers besides the Captain; so very industrious were they to avoid putting too much Power into the hands of one Man.”
Pirates confronted essentially the same dilemma in setting up their system of governance that James Madison famously described in Federalist 51. As Madison put it, “But what is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself.”
Madison’s solution to this dilemma was constitutional democracy. “A dependence on the people,” Madison argued, “is no doubt, the primary control on the government.” “[B]ut,” he continued, “experience has taught mankind the necessity of auxiliary precautions.” “[T]he constant aim is to divide and arrange several offices in such a manner as that each may be a check on the other—that the private interest of every individual may be a sentinel over the public rights.”
This was pirates’ solution as well--but they forged it more than half a century before Madison put pen to paper. Pirates, of course, weren’t the first to invoke this solution. And there’s good reason to think that some of the legitimate world’s early experiences with democracy, separated powers, and so on, may have influenced pirates’ system of governance.
But could the direction of influence have also run the other direction? This is the question I began with. And while, unsurprisingly, I’ve yet to come across direct evidence that any of our Founding Fathers looked to pirate governance in forging America’s system of government, it might be too hasty to totally dismiss this suggestion as well.
I did a quick look to see if there might be any evidence that any of the Founders were even aware of pirates’ governance regime . . . .
And there is. Thomas Jefferson owned a copy of both of the two most important late 17th-century and early 18th-century books that describe pirate governance, Alexander Exquemelin’s Buccaneers of America, and Captain Charles Johnson’s General History of the Pyrates.
Does this prove that pirates’ constitutional democracy influenced Jefferson? Of course not. For one thing, Jefferson had many books in his personal library. That doesn’t mean all of them played a role in his thinking about American government. Further, I don’t know when Jefferson acquired these books. His copies were published (in 1774) before the Declaration of Independence; but that doesn’t tell us when Jefferson bought or read them.
But, at least in principle, it does suggest TJ could have “had a little captain in him.” The mere prospect is tantalizing enough for me . . .
Somali Pirates: Avengers of Social Justice?
An increasingly common claim to hear is that the Somali pirates are just attempting to right the wrongs of greedy multinationals and others who, since Somalia’s government collapsed in 1991, have taken advantage of the country’s statelessness to dump toxic waste and exploit the resources in its coastal waters.
Somehow, capturing vulnerable commercial vessels traveling through Somalia’s water lanes, holding their crews hostage for weeks at a time, and then ransoming them for money is supposed to punish(?) or deter(?) this behavior. Recognition of the Somali pirates’ socially conscious motivations isn’t meant to justify their actions, it’s said--merely to help us better understand what causes people to turn to piracy in the first place, presumably so that we can prevent it.
I’ve been asked several times what I think of this claim. My answer: I don’t buy it.
Like their 18th-century predecessors, the Somali pirates are businessmen. As I think their basic MO--capture ships; hold sailors hostage; ransom for wads of cash; buy BMW--pretty clearly evidences, they’re in it for the money. And as far as I know, the pirates haven’t donated any of the estimated $30 million+ they managed to steal last year to Greenpeace or environmental organizations for the cleanup of their polluted coastal waters.
So where does the image of Somali pirates as avengers of social justice come from?
From Somali pirates, of course. The Somali pirates see a benefit of presenting themselves this way. And with good reason. Their claim has been repeated enough in popular media to lead at least some to start asking whether it might be true. Transforming anger into sympathy isn’t a bad strategy for Somali sea dogs.
If the idea of a pirate PR scheme sounds far fetched to you, consider its historical precedent. As I discuss in The Invisible Hook, early 18th-century pirates were also keenly aware of their public persona and worked diligently to manipulate this image to their benefit.
For example, one of the problems early 18th-century pirates confronted in attempting to maximize profit “on the account” was recalcitrant captives who hid, and sometimes even destroyed, booty to prevent their pirate captors from getting a hold of it. Obviously, loot that pirate captives successfully hid or destroyed was loot that couldn’t contribute to pirates’ revenue. To prevent this behavior, pirates sought to establish a reputation as “men on the edge”--men who, if resisted in these or other ways, would launch into a torturous frenzy.
Pirates worked on developing this reputation in several ways. One was by inflicting barbarous punishments on sailors who didn’t immediately deliver up everything they had that the pirates wanted. I won’t go into detail about what these tortures here . . . Suffice it to say, none was as kind or as quick as “walking the plank.”
Another way pirates cultivated their image as “hair triggers” was by displaying and proclaiming “madness,” fearlessness of death, hatred of God, etc., in front of unwitting captives who were led to believe that their captors might really be from hell, as some pirates intimated they were.
Word of mouth helped spread and institutionalize pirates’ resulting reputation. But so did the early 18th-century media--newspapers that recounted captives’ accounts of piratical claims and deeds that they heard and observed while under their captors’ control. Since pirates were aware of such reporting, they also were aware that they could spin their public image to their advantage by acting out appropriately in front of the legitimate persons they interacted with. So, this is exactly what they did.
This strategy proved at least partly effective. In fact, to this day, popular perceptions of 18th-century pirates remain very much wedded to, and in important ways reflect, the public image pirates sought to project among their contemporaries as a means of facilitating compliance with their demands for the purpose of enhancing profit.
It remains to be seen what, if any, substantive effect the Somali pirates’ PR campaign--a campaign that aims to present them to the world as sea-borne Captain Planets--will have. This depends on how well such spin succeeds in duping those susceptible to the pirates’ message. But the early signs look positive for Somali pirates. Three of my last three interviewers asked me about the Somali pirate social justice angle, which means that, at a minimum, the pirates’ message is getting out there.
Pirates and the Law: A Retrospective
In the late 1720s the Caribbean pirates’ flourishing community was brought to a screeching halt. An enhanced British naval presence was partly responsible for this. But, as I discuss in The Invisible Hook, most important in bringing pirates to their end was a series of early 18th-century legal changes that made it possible to effectively prosecute pirates.
In the years before 1536 England tried pirates in its Admiralty courts under the civil law. Convicting an accused pirate proved very difficult, however. Civil law rules required an accused pirate to confess his guilt or two eyewitness, neither of whom could be accomplices, to testify to his piracy. Such eyewitnesses were hard to come by, and pirate confessions, even harder. Thus many pirates escaped conviction.
To rectify this problem, in 1536 England introduced the Offenses at Sea Act, which kept piracy a crime at civil law but allowed pirates to be tried via common law rules. Under this procedure the fate of accused pirates was decided by a jury of 12 men and, crucially, accomplice testimony was permitted.
The Offenses at Sea Act was helpful but eventually proved insufficient. In the 17th century, pirates were increasingly active in and around England’s distant and growing colonies. Under the 1536 law, accused pirates and potential witnesses had to be shipped to England for trial at the capturing colonial government’s expense. Rather than bear this cost, many colonial governments simply let pirates go instead.
Out of this unfolding of events emerged the Act for the More Effectual Suppression of Piracy, initially introduced by parliament in 1700. This act permitted colonial governments to try and execute pirates on location. (It also eliminated jury trials for pirates, placing their fate in the hands of colonial-appointed commissioners, but continued to permit accomplice testimony). No longer constrained by the need to send pirates to England for trial, the 1700 law proved to be a critically important legal change for bringing pirates to justice.
The initial act was set to expire seven years after its introduction but was made permanent in 1719 when the pirate population began exploding and when various additions to the act, such as rewards for capturing pirates, and punishments for pirate consorters, were also introduced. In 1721 further modifications were made, including a provision for punishing armed merchantmen that refused to fight their pirate attackers.
The effect of these early 18th-century legal changes was to significantly increase the risk, and thus the cost, of pirating after 1719 and 1721 in particular. Whereas only 31% of all pirates hanged between 1704 and 1726 (for which I have data readily available) were hanged in the 15 years spanning 1704-1718, 69% were hanged in the mere seven years spanning 1719-1726 (with the vast majority of these occurring in the years spanning 1721-1726). This posed a significant problem for pirates because as the legal cost of piracy rose, pirates’ ability to find willing recruits declined, threatening the viability of their criminal enterprise.
But pirates did not sit on their laurels in the face of tightening legal screws. Although they ultimately failed in their efforts, for a short time, at least, they succeeded in partially offsetting the rising legal costs of piracy, helping them to continue to find the recruits they sought. Pirates achieved this by exploiting a loophole in anti-piracy law that let off any man who could demonstrate to the court that he was a “forced man,” pressed against his will into pirates’ service. The “forced” defense was plausible since pirates sometimes did conscript sailors (though it seems that in general this was not the case, volunteers from overtaken ships sometimes being more numerous than the overtaking pirate crew was willing to have). Pirates exploited this loophole in several ways. But perhaps the most interesting was their reliance on “ads of force,” which proved to be a remarkable recruiting tool for pirates.
An ad of force was a newspaper ad, published by an allegedly conscripted sailor’s released captain or fellow seamen on behalf of their forced compatriot, publicly certifying that the sailor had been “forced against his will” to join so-and-so’s pirate crew on this such-and-such date, etc. If this pirate crew was ever captured--an increasingly likely event after 1719 and 1721 owing to the legal changes discussed above--the ostensibly forced sailor could point to his ad in his defense at his trial and the court might consider this evidence for his claim, thus increasing his chances of being let off.
Ads of force were an excellent invention for conscripted sailors. But they were equally excellent for volunteers who wanted a little insurance against the greater risk of their newly chosen trade. An ad of force was far from an iron clad means of getting off at a pirate trial. But it certainly helped. (It was most helpful when used in conjunction with other evidence of alleged innocence, which pirates also concocted, but which there’s not space to discuss here). Courts considered it and some sailors appear to have been acquitted at least partially on the basis of such ads--some no doubt legitimately, but for many others this was simply their pirate insurance policy paying off. Pirates thus managed to use ads of force to help offset the rising cost of piracy in the early 18th century and in some cases were eager to remind merchant sailors they sought to recruit that they could use this device to help persuade them to join.
Notably, the popularity of ads of force tracks the risk of pirating, which in turn tracks changes in anti-piracy law during this period, quite well. Of all those ads of force published in the Boston News-Letter between 1704 and 1726, for instance, only 7% appear in the 15 years spanning 1704-1718, while 93% appear in the mere seven years spanning 1719-1726, the bulk of these again appearing between 1721 and 1726.
As discussions begin moving forward about how legal changes might be used to help suppress modern pirates, it’s useful to look to the past to see what problems were confronted in prosecuting pirates historically, what was useful for overcoming these problems, and what wasn’t. Similarly, as modern pirates, eager to persuade courts of their innocence, begin to come under the purview of various nations’ legal systems, it’s useful to recall that pirates, like other people, are unlikely to be passive responders to the law. Rather, as (or if) the law becomes an important constraint on their behavior, pirates may seek to offset the law’s effects in unanticipated ways, manipulating the law as the law seeks to manipulate them.
As this is my final day guest-blogging for the week, I’d like to thank Eugene for kindly inviting me to do so and those of you who offered thoughtful comments for participating in the discussion. I greatly enjoyed the opportunity and conversation.