Pirate Econ 101
Disney thinks it has pirates figured out. A peg leg, a hook for a hand, a flashy moustache that swirls at the tips, and a parrot attached to their shoulder that you can tell is evil because it has angled eyebrows – all a necessary part of the uniform. That is about as far as Disney can take its pirate representation without being slammed with lawsuits by concerned parents, because the real pirates were more than just clumsy crew members who were always tripping over their own feet and bickering with children. They were violent and cruel. But most of all, they were clever. Their behaviours were not a result of unchecked impulses and potential undiagnosed psychopathy, but rather a result of calculated thinking and appliance of strategic acts that can be analysed today using modern economic theories.
Pirates engaged in organised crime, which only managed to become such a successful enterprise due to their ability to employ democratic constitutions as a means to reduce conflicts and establish a system of law and order amongst them (Leeson, 2007). One way this was achieved was through elections within the ship to choose the captain, and electing an individual called the Quartermaster to divide the chores and goods so that captains have limited power, reducing risk of exploitation. This was important for them to thrive and maximise profits because it enabled their crews to run smoothly, and was also a significant sign of their intelligence because they adopted this institution before the 17th and 18th-century governments adopted such practices themselves (Leeson, 2007). Even if the government had beat them to the chase, a pirate who was wronged by his pirate friend couldn’t very well march up the steps of their times’ equivalent to a police station and file a report. Both of them would be hanged the next day, as was common protocol when dealing with pirates back then. Here, the Coase theorem, a fundamental economic theory, can also be applied. It asserts that under certain conditions, private parties can negotiate and achieve efficient outcomes in the absence of formal institutions such as governments and legal frameworks. This is exactly what the pirates were able to achieve.
Unlike merchant ships, which were susceptible to predation and abuse from their captains due to the ship's owner electing the leader, pirates faced no such restriction. They acquired their ships through stealing, meaning that they all had a stake in the matter. While a captain was necessary, especially in tense situations like battle where split-second decisions had to be made without debate, there was a lot of room for agency since the pirates were the ones who elected their desired leader (Leeson, 2007). The captain had no choice but to be just toward his crew; otherwise, they would simply elect someone else if they weren’t happy - and publicly execute the faulty captain for good measure. You could say that pirates had a high rate of employee satisfaction. Employee satisfaction can be seen as a component of human capital. In creating a positive work environment where their input mattered and they were under the rule of their choice, crew members were more likely to be committed to their tasks and willing to put in their all – quite important for a job that requires one to put their life on the line.
Now that we have an idea of how pirates behaved to ensure maximum output from their own, we can briefly explore the ways they treated their victims. The theory of reputation-building suggests that reputation is a valuable asset that can provide long-term benefits. In the case of pirates, their reputation is infamy, and helped them reduce captive behaviours that would have resulted in losses for them, therefore making sure they only stood to gain. If their captives decided to fight back, the pirates would most certainly lose since they were usually outnumbered. They would end up facing loss and risk if some of their own got significantly injured or killed, or their ship or the ship they were attempting to steal was damaged. Repair costs were no joke. Another, less violent, method of resistance captives would employ was to get rid of the goods when they spotted the pirates, by either hiding them carefully or simply dumping them overboard to make themselves less appealing targets (Leeson, 2010). Pirates purposefully made it known that anyone who tried to resist capture would be killed, and anyone who tried destroying the goods would be brutally tortured. Think mutilation and fire. No elaboration for the sake of keeping it PG, but the imagination can fill in the blanks.
After carrying this threat out consistently for a number of raids and with the help of the survivors’ accounts being dramatically recorded in newspapers for everyone to read, the message became clear. The merchantmen either surrendered immediately, got to keep their lives and walk away unharmed and able to pass on the story to other merchantmen, or they were murdered. Not really a rainbow and cupcakes kind of deal, but it worked to the point where there were laws passed forbidding merchantmen to give up their ships without putting up a fight, yet they continued to submit to the pirates anyway – a crew led by pirate captain Edward Low, who had committed massacres and was known for his cruelty, split up into groups of just five men each to attack ten French ships at once. They managed to take over them all without a single bullet being fired, just by using threats. To directly quote from a primary record written by contemporary pirate Captain Johnson, “he threatened all with present Death who resisted, which struck such a terror to them, that they yielded themselves up a prey to the villains, without firing a gun (Johnson, 1728). Their credibility had been established, and now they reaped the rewards of it because surrender became much more frequent. The immediate surrenders maximise their profits by saving them time and energy that they could use raiding more ships and guaranteeing them the full load of goods on said ships with no risk of loss for them in terms of lives and material.
Pirates knew that fear was not the only incentive they could employ. They engaged in positive reinforcement as well by occasionally rewarding those who were cooperative during their raids. There were quite a few records of this. A trader at a time when commerce was increasing, Snelgrave published a first-hand account of his thoughts and experiences regarding slavery and the slave trade. At one point in his travels, he was captured by pirates and his cooperation led them to give him a ship full of cargo at the end of his captivity (Snelgrave, 1734). Of course, this wasn’t just out of the kindness of their hearts. It was likely to show that they were rational, that they were not just money-crazed maniacs who only operate in violence. It made their job easier for them in the long run because the merchants put up way less resistance with both the assurance of escaping with their lives and all their body parts intact and the potential of gaining something out of the terrifying ordeal. It incentivizes their victims. As mentioned before, pirates heavily relied on the theory of reputation-building to minimise resistance and damages to their goods to be able to maximise profits in each raid. This positive reinforcement plays into that as well and decreases losses in terms of time since merchantmen have more of a reason to keep their goods intact, lest the pirates are feeling particularly generous that day and let them retain part of the loot. However, it wasn’t just their victims benefiting from positive reinforcement, as another example of incentive provisions was rewarding crew members with bonuses when they “displayed particular courage in battle, were the first to spot potential targets”, and so on (Leeson, 2007). The theory of incentives once again is employed to ensure that high performance is encouraged and to motivate other crew members to work harder and be more diligent.
So perhaps pirates weren’t the friendliest bunch. Definitely, not a crowd you would want showing up at the local business networking event. But they were by no means uncivilised brutes with cannons for brains. They operated by their own set of ethics – this much is clear from the common consensus forbidding harm towards those who comply and the democracy that rules their ships – and stuck to economic principles that ended up maximising their profits and creating a golden age for piracy.
Works Cited
Johnson, C. 1726-1728 [1999]. A General History of the Pyrates. Schonhorn, M. (Ed.). Dover, New York.
Kamola, I. (2018). Pirate Capitalism, or the Primitive Accumulation of Capital Itself. Millennium, 47(1), 3–24. https://doi.org/10.1177/0305829818771525
Leeson, P. (2007). An-arrgh-chy: The Law and Economics of Pirate Organization. Journal of Political Economy. 115. 1049-1094. 10.1086/526403.
Leeson, P. (2010). Pirational choice: The economics of infamous pirate practices. Journal of Economic Behavior & Organization. 76. 497-510. 10.1016/j.jebo.2010.08.015.
Snelgrave, W. 1734 [1971]. A New Account of some Parts of Guinea, and the Slave Trade. F. Cass, London.
