The Invisible Hook: The Hidden Economics of Pirates

Published by EH.NET (October 2009)

Peter T. Leeson, The Invisible Hook: The Hidden Economics of Pirates. Princeton, NJ: Princeton University Press, 2009. xvi + 271 pp. $25 (hardcover), ISBN: 978-0-691-13747-6.

Reviewed for EH.NET by Daniel K. Benjamin, Department of Economics, Clemson University.

The label ?Golden Age of Piracy? has expansively been applied to the decades from the 1650s to the 1720s, or narrowly limited to the years 1716-1726. Within the longer span, there were three distinct eras. From the 1650s to the 1680s, Anglo-French pirates harassed Spanish colonies and shipping, chiefly in the Caribbean. Neither England nor France had much interest in coming to the aid of Spain, and the English were further distracted by internal conflict and three wars with the Dutch. (The English did mount modestly successful operations against the Algerine corsairs in the Mediterranean from 1677 to 1681, but piracy along the coast of North Africa is generally excluded from most discussions of piracy?s Golden Age, including the present one.)

The subsequent outbreak of the 1690s was centered in the waters east of Africa, with targets that included Muslim and East India Company ships. Pirates cruised the shipping choke points near Madagascar and the approaches to the Red Sea, capturing some of the richest prizes ever recorded (including the Great Moghul?s Ganj-i-sawai, taken by William Avery), and the era produced the notorious, but largely ineffectual, Captain Kidd. Vigorous resistance by armed ships of the East India Company, aided by the start of the War of Spanish Succession, which deprived would-be pirates of potential crew, brought this episode to an end.

The final spasm erupted after the 1713 Treaty of Utrecht, lasting until the mid-1720s. It was this, the most expansive and damaging episode, that brought the full wrath of European and colonial governments to bear, yielding concerted action that effectively ended modern large-scale piracy. It is these years, from 1716 to 1726, when Anglo-American piracy reached its zenith, that are the chief focus of Peter Leeson?s engaging Invisible Hook. The era began not long after many thousands of merchant and naval seamen, plus thousands more privateersmen, were cast upon the beach at the end of the War of Spanish Succession. (The Royal Navy alone shrank from 53,000 to about 13,000.) A small fraction of these men ? perhaps 2,000 or so scattered across about 25 ships at the 1720 peak of piracy ? chose to live ?on the account,? wreaking most of their havoc along the coast of the American colonies and in the waters between there and West Africa. The very real threat to the burgeoning Atlantic triangular trade soon led the English and colonial governments to take concerted and ultimately successful action against the miscreants. The end came quickly: according to some scholars, with the 1722 death of Bartholomew (?Black Bart?) Roberts, while others, including historian Marcus Rediker, mark the end with the 1726 execution of William Fly in Boston.

Leeson?s main interest is the mechanisms of cooperation among pirates who seemingly thrived at their trade, however briefly. (None of the most notorious pirates seem to have lasted more than two or three years; some made it only a few months before capture and the gallows intervened.) Despite being largely illiterate and operating outside the law, the men who sailed under the Jolly Roger managed to band together, ship by ship, long enough and effectively enough to terrorize most of the Atlantic shipping lanes. The key to pirate success, in Leeson?s view, is that self interest led pirates to design and implement ingenious institutions that channeled their talents in ways that were productive and profitable ? at least from their perspective.

Consider first the notorious skull and crossbones, or Jolly Roger. Leeson argues that pirates employed this flag as a productive signaling device. Pirates were in the game for profit, and actual combat represented a source of costs that could quickly drive profit negative. Hence, pirates hoisted varieties of the Jolly Roger to inform their prey: If you surrender you lose your money, but if you fight, you lose your life, too. The message often got through successfully, prompting quick acquiescence, thereby enhancing pirate profits.

Leeson also presents a compelling argument that torture by pirates was not (primarily) random violence perpetrated by wanton thrill-seekers. It was instead a means of enhancing pirate profits. If the captain, crew, and passengers aboard a captive vessel promptly revealed all of the valuables aboard, they might hope to escape unscathed, save for the loss of their possessions. But if the captors suspected that someone was holding out on them, gruesome treatment was likely. And because the torture was often prolonged and conducted where potential hold-outs could witness it, the result was to extract the desired information not only from the victim, but from others aboard who wished to avoid a similar fate.

There is some dispute in the historical record as to how many pirates were conscripts rather than willing volunteers. Leeson cogently assesses this debate, as well as why blacks aboard pirate vessels seem to have been treated as full and free crew members, rather than enslaved. His analysis of both issues rests on the same well-argued points. Unwilling crew presented two problems for pirates. First, they were likely to be less than wholehearted contributors during times of greatest effort and danger, chase and capture. Second, in the event a pirate ship itself was captured, unwilling crewmen (conscript or slave) could give credible evidence at trial that might win their own freedom even as it helped send the rest of the crew to the gallows. Thus, Leeson concludes, both conscription and slavery were the exception under the black flag.

Leeson?s preface begins with the sentence ?I?m not a historian.? He is, perhaps, too modest when it comes to the behavior of pirates, for he has clearly scoured the literature. But on other matters, his demurrer is apropos. Most of the first third of the book is devoted to the pirate system of ?constitutional democracy.? The constitutions in question were the articles of agreement under which pirates sailed, documents that specified rules for dividing prize goods, and also singled out behavior that was to be rewarded or punished, as the case may be. As for democracy, broad policy decisions aboard pirate vessels were made according to ?one man one vote.? For example, captains were chosen or deposed by majority rule, while a ship?s articles of agreement were decided upon by rule of unanimity. Leeson?s discussion of these issues would have us believe that the political acumen of pirates was advanced beyond all of their contemporaries; indeed, so perceptive were they on matters of governance that pirates might well be thought of as intellectual predecessors of the American Founding Fathers.

To assess Leeson?s view, let me begin with pirate constitutions ? which requires a consideration of privateers. Privateers were legally-sanctioned, privately-owned ships of war that operated during wartime. They profited by capturing enemy merchant ships and cargo, the status of which as lawful prizes was decided upon by courts. These private ships of war had for centuries served as crucial wartime complements to chronically weak national navies, and continued in that role for a century beyond the end of Atlantic piracy, even as national navies grew rapidly in strength. Privateers operated under strictly enforced letters of marque issued by their respective governments, but the rights and responsibilities of crew and owners toward one another were governed by articles of agreement. These were sophisticated, legally binding contracts, tailored to the intended mission, that were signed by all parties to the ventures, including every single member of each crew. Some, perhaps many, pirates had previously served as privateers, so it little surprise that they took their own articles of agreement directly from the privateers on which they had served ? after all, these contracts had successfully evolved over a period of centuries.

Thus we see that Leeson?s ?pirate constitutions? were, like pirates? other possessions, stolen ? in this case from their former privateering ships, rather than from their prey. What then of the unanimity required for enactment of these constitutions? Recall that all members of privateer crews signed the articles of agreement under which they served. Indeed, this is, as far as I know, standard for contracts: all parties to them must agree before being bound by them. If this be unanimity, so be it, but as with the articles themselves, pirates offered no great innovation here.

This leaves the matter of democracy as a means of making other key decisions aboard pirate ships, including the selection of the captain. There is no doubt that in this regard, pirates differed radically from virtually all other seafarers, past or present. Success ? indeed survival ? at sea demands rapid decision-making and immediate, unquestioned obedience to orders. It is no place for democracy, as evidenced by the fact that no ships with recourse to the rule of law resort to this institution. Even pirates suspended the democratic process during times of chase, capture, and combat, ceding absolute authority to the captain at such times. The resort to democracy at other times seems to me no more than a sad necessity brought on by the fact that pirates were operating outside the rule of law. Indeed, in a lawless world where men are roughly equal in their ability to inflict force on one another, John Umbeck?s work on California gold fields has previously informed us that ?one man, one vote? is the most likely governance equilibrium. Umbeck?s insights also help us understand why pirates would agree to divide their prize money equally, save for small additional increments voted to men (such as the captain or quartermaster) who have special talents (e.g., the ability to navigate or to resolve conflict among armed shipmates): no other allocation is an equilibrium.

Leeson also misses the mark in dealing with other elements of the historical context. He would have us believe, for example, that the merchant fleets of the era suffered from what can only be characterized as widespread market failure. In Leeson?s view, absentee merchant-owners hired seamen to captain their vessels and gave them absolute authority to run the vessels as they wished. The captains, in turn, quickly turned predators, treating their crews both unreasonably and in ways that were inimical to the owners? interests. According to Leeson, it was the classic principal-agent problem run wild, and thus the perfect recruiting tool for pirates: men left merchant ships in droves, seeking the sanctuary of piracy. There is little doubt that courtroom tales of tyrannical merchant captains were told by pirates hoping for mercy. And there were some merchant masters, just as there were some naval captains, who were sadistic tyrants. But it is not merely naive to imagine that successful merchants were unable to discern that command without responsibility was a recipe for disaster; it is also inconsistent with what we know of the era. Partial ownership by merchant captains was the rule rather than the exception, and even though those shares were often small minority interests, they bulked large in the portfolios of the captains themselves. Oddly enough, Leeson eventually admits that merchant masters did have shares (and also were often bound by family to ties to one or more of the other owners). Still, he concludes that merchant shipping foundered nonetheless, unable ?to overcome Madison?s paradox of power? (expressed much earlier by Juvenal as: quis custodiet ipsos custodies?). What Leeson does not do is solve the mystery of how this failed system managed to serve as the backbone of the world?s commercial trading network ? outliving by far the brigands who sought to destroy it.

Daniel K. Benjamin is Alumni Distinguished Professor and Professor of Economics at Clemson University. He is currently engaged in a long-term study of the organization and incentives of the British Navy during the age of sail. His most recent book (with Douglass North and Roger LeRoy Miller) is The Economics of Public Issues, 2010.