AN ECONOMIC THEORY OF PIRACY.

AN ECONOMIC THEORY OF PIRACY. Professor Peter Leeson has authored a book about the economic theory of piracy: THE INVISIBLE HOOK. Professor Leeson was interviewed here by Ryan Hagen for the Freakonomics blog. The title of the book draws a contrast with the economist’s metaphor of “the invisible hand”. Professor Leeson says: “…for Adam Smith, self-interest results in cooperation that generates wealth and makes other people better off. For pirates, self-interest results in cooperation that destroys wealth by allowing pirates to plunder more effectively.” Leeson also proposes a political theory. Leeson’s 18th century pirates “set up their own early versions of constitutional democracy, complete with separation of powers, decades before the American Revolution.” The pirates needed their own rules because there was no state to make or enforce rules for pirates. Pirate crews “routinely” deposed their captain if he was abusing his power or was incompetent. In other words, a captain could be replaced in order to promote efficiency. Pirates were paid better and treated better than seamen who were not pirates, presumably for the same reason that a crew had a right to replace a captain—the need to provide incentives for participants in a risky enterprise.