The Invisible Hook

The Hidden Economics of Pirates

By Peter T. Leeson

(Princeton University Press; 271 pages; $24.95)

The attack two months ago on a U.S. cargo ship, the Maersk Alabama, by pirates from Somalia, and the ensuing hostage standoff involving the vessel's captain, Richard Phillips, focused attention on a threat that most Americans - if they even acknowledge its existence off the big screen - more readily associate with the 18th century than the 21st.

Yet there is every indication that piracy is not only alive, but actually thriving. Off the Horn of Africa alone, the 125 ships attacked in the first five months of 2009 are already more than the total of 111 assaults (42 of which resulted in successful hijackings) reported in those same waters during all of 2008, itself a record year for the marauders.

The resurgence of this challenge suggests that one ought to look at the earlier period of pirate activity, both for a better understanding of the piracy phenomenon and for a lesson or two on how it might be countered. Fortunately, Peter Leeson, an economics professor at George Mason University, offers a fascinating perspective into the world of Blackbeard, "Black Bart" Roberts and "Calico Jack" Rackham in his highly readable book "The Invisible Hook: The Hidden Economics of Pirates."

Leeson's title is, of course, a clever nod to Adam Smith's "invisible hand," which postulated that the actions of individuals are generally motivated by self-interest but that self-interest is often best served by also doing what is best for others. While pirates clearly differ from ordinary economic actors, the author argues that they are nonetheless just as self-interested, rational and responsive to incentives - and hence, pop culture depictions notwithstanding, subject to the same "rational choice" analysis beloved of economists. "A pirate ship more closely resembled a Fortune 500 company than the society of savage school children depicted in William Golding's Lord of the Flies," he writes. "Peglegs and parrots aside, in the end piracy was a business. It was a criminal business, but a business nonetheless, and deserves to be examined in this light."

Applying economic analysis to the "Golden Age of Piracy" between 1716 and 1726, when there was a global surge in the number of pirates operating throughout the Caribbean as well as along the coastlines of the Americas and West Africa and in the Indian Ocean, Leeson takes a look at the governance of pirate crews, their flying of the Jolly Roger, the reputation that they enjoyed for brutality, pirate conscription and the racial tolerance on board pirate ships. Treating each of these questions in a separate chapter, Leeson weaves material from historical chronicles and secondary works to present an engaging portrait of life on the "floating societies" that existed under the skull-and-crossbones pennant, one that, for all its violent and mercenary aspects, produced results rather progressive for the times.

While they were described by one contemporary as "Robbers, Opposers and Violators of all Laws, Humane and Divine," 18th century pirate crews actually established among themselves functional constitutional democracies, complete with written rules regulating conduct, popular elections of captains and other officers, and checks and balances against abuse of power. This elaborate system was not any sentimental attachment to democratic ideals on the part of the pirates but rather self-interest in preventing internal conflict in order to more efficiently achieve their criminal objectives. Similarly, Leeson shows how the dreaded pirate flag and the reputation for cruelty that those who sailed under it enjoyed are both explicable by the logic of profit maximization. In his interpretation, because their costs in terms of munitions expended and possibly lives lost were decreased and their profit from plunder was enhanced if merchant vessels targeted would yield without a fight, the pirates consciously fostered a "brand name" so frightening that it sapped their victims' will to resist.

In a similar vein, pirates recognized that not only were unwilling seamen unlikely to "give their all," but, if they constituted a significant portion of the crew, they might significantly weaken a ship's fighting strength. Hence, again out of self-interest, pirate ships were largely manned by volunteers and had a greater proportion of black crew members than other vessels of the time - upward of a quarter, according to Leeson. Moreover, these black pirates usually enjoyed the same rights as their white mates with respect to a voice in deliberations and a share in any booty seized.

At first glance, the ragtag Somali youths armed with AK-47s and RPGs in speedboats sallying forth recently against huge cargo ships in the Gulf of Aden and the western Indian Ocean seem about as far removed from the swashbucklers of the Spanish Main as one can get. Oddly enough, this seems to be Leeson's viewpoint, since he avers in the epilogue that "modern pirates share little in common with their predecessors" - a rather superficial judgment given that, having convincingly made the case that the pirates he studied were rational economic actors who responded to a calculus of costs and benefits, he advanced no reason why the same cannot be said about today's seagoing raiders from Somalia.

In point of fact, behind every Abduwali Abdukadir Muse, the sole surviving member of the gang that attacked the Maersk Alabama who is the defendant in the first U.S. piracy trial in more than a century, there stands a sophisticated enterprise involving financing, training, intelligence, logistics and even public relations components. To view Somali piracy as irrational or chaotic would be to misconstrue it altogether, leading to "solutions" that would be ineffective at best. On the other hand, if one grasps the "invisible hook" at work even in stateless Somalia, then it might just be possible to target the marauders' incentive structures, possibly deterring them from their predations.