In the so-called golden age of piracy, spanning the late 17th and early 18th centuries, pirate captains such as Blackbeard and Bartholomew Roberts roamed the seas in search of plunder. Their fearsome exploits became the stuff of lore, inspiring countless films, books, amusement-park rides and, ahem, more films. But those same exploits also fed a reputation that facilitated their activities—a sort of brand name that was widely known and was instantly recognizable by its logo, the Jolly Roger (a black flag with a skull and crossbones).
In a new paper, "Pirational Choice," and in the forthcoming book The Invisible Hook: The Hidden Economics of Pirates, economist Peter Leeson of George Mason University in Fairfax, Va., examines the inner workings of pirate organizations. He makes the case that pirates, far from being the unrestrained barbarians of legend, were actually shrewd businessmen who carefully calculated their actions to increase their haul while minimizing risk and expenditure. Leeson spoke to us recently about his research and how modern-day pirates stack up against their golden-age counterparts. An edited transcript follows.
Your central thesis seems to be that pirates are not the roving ruthless barbarians that they've been portrayed as but instead are very conscious and rational money-maximizers.
That's right. Piracy is an employment, and I think that we should think about sailors' decisions to enter piracy as opposed to, say, the legitimate merchant service as an employment decision just like anybody else's. The same features that are driving pirates' behavior drive our behavior when we think about employment options. And they are rational again in the traditional economic sense, which is that they respond to incentives and they consistently act to achieve their goals.
You discuss strategies that pirates employ to brand themselves and to develop the image of barbarians not to be trifled with. And you highlight this by citing the example of the Jolly Roger.
At the time that pirates of the early 18th century were operating in the Caribbean, there were other potential attackers that a merchant crew might confront. The reason that's important is because those other potential attackers were less fearsome than pirates, because they were constrained by the law. Pirates could do whatever they wanted to you if you resisted them, but these guys were, at least in principle, somewhat limited. So if pirates wanted to take the prey with as little resistance as possible, which they did because they wanted to keep costs down, what they needed to do was to somehow indicate that "I'm a pirate and I will kill you if you resist me," as opposed to one of these legitimate attackers. And in response to that need, which is again a profit-driven purpose, pirates developed the Jolly Roger.
Can you please clarify the term "separating equilibrium" that pops up in your chapter on the Jolly Roger?
A separating equilibrium is to be contrasted with what's called a pooling equilibrium. It's part of signaling theory, the idea that people want to engage in various behaviors to communicate something about themselves that isn't directly observable. What makes for a successful signal is if it's more costly for some types to send than it is for others.