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Wednesday, June 17, 2009

Pirates With a Libertarian Bent

Peter Leeson explores “The Invisible Hook”

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Even pirates need to make a profit. That, really, is what piracy is all about, Peter T. Leeson explains in his delightful and instructive The Invisible Hook: TheHidden Economics of Pirates (Princeton University Press), which joins the recent rash of books describing seagoing brigandage of the 18th century.

The Invisible Hook, however, is not about pillage and plunder, except to show that such activity was counterproductive to profit-making, and therefore pirates did not engage in it to nearly the extent portrayed in popular media. They were, in a word, businessmen. You know, like the Corleones.

Leeson, a professor of economics at George Mason University, takes an appreciative but not condoning attitude toward pirates. The "invisible hook" of his title is the piratical analogy to Adam Smith's "invisible hand that guides economic cooperation," which he claims "is as true for criminals as it is for anyone else"-with two differences.

First, whereas the invisible hand is meant to examine the hidden order behind the metaphorical anarchy of the market, the invisible hook examines the hidden order behind the literal anarchy of pirates. Second, pirates were not in the business of buying, making and selling, but thrived parasitically off the production of others; they did not benefit, but harmed, society.

The book primarily covers the years 1716-1726, the final stage of the great age of piracy, when anywhere from 1,000 to 2,000 sea bandits prowled the Caribbean and Indian and Atlantic oceans in any one year under such captains as Blackbeard, Bartholomew Roberts and "Calico" Jack Rackham.

We must view piratical activity through the economic notion of rational choice, Leeson emphasizes. Pirates did what they did for money-big money, sometimes thousands of times what an individual seaman could earn on a merchant ship or in the Royal Navy.

To avoid, in Leeson's howler, complete "an-aargh-chy, they had governance, if not government. In fact, he says they could not have been successful without such governance. As one historian puts it, "They had no [outside] discipline, and therefore much self-discipline." They literally practiced honor among thieves.

Pirates may have been outlaws, but they were not lawless. A pirate ship was an egalitarian democracy-50 years or more before democratic societies on land. On the basis of one pirate, one vote, they organized their ships to avoid the "captain tyranny" and other abuses of merchant ships, elected their captain and other leaders and erected a system of checks and balances and separation of powers.

This organization rewarded good captains and pushed aside the bad. Pirates, after all, could "vote with their feet" by leaving a bad ship for a better one.

Compensation scales were astonishingly flat. Pirate captains typically received no more than twice the share of booty that ordinary pirates received.

They flew the black Jolly Roger flag with skull-and-crossbones to induce terror and thereby reduce fights. The flag's "signal," in effect, was: Surrender and no one gets hurt; resist and you will all be killed-period, no exceptions. This may even have saved lives, since most victims believed the deadly promise and did not fight.

Even in brutality there was method (or rational choice) in their madness. Some, of course, tortured out of sadism, but mostly to try to obtain information on hidden loot or to promote their fearsome reputation. They had what economists call a "high discount rate"-that is, the future meant little to them-and they wanted victims inclined to be recalcitrant to understand that.

Conventional wisdom to the contrary, pirate ships did not routinely conscript crew-members, because they simply were not as useful or dependable as volunteers (who were not hard to come by). In fact, they needed to "press" or "impress" members less than the Royal Navy did. On the other hand, evidence of having been pressed was an effective defense if you were hauled into court on charges of piracy, so captured pirates would do all they could to prove that their predations had been coerced.

The Invisible Hook is both entertaining and educational, if a bit like a textbook-the author repeats what he has already said in a summation at the end of each chapter. There is scarcely a lesson herein, including the dislike of most government regulation, that could be objected to by the National Association of Manufacturers or the U.S. Chamber of Commerce.

Pirates were libertarian? Who knew?