Blackbeard’s pirates offer a surprising lesson in efficient organisation and management

In The Invisible Hook, economist Peter Leeson attempts to apply what he calls the “economic way of thinking” to piracy. He sets out to explain the actions of Blackbeard and his fellow pirates by way of three basic assumptions: that individuals are self-interested, that they are rational and that they respond to incentives. He argues that this economic “rational choice framework” is uniquely suited to unravelling the phenomenon of piracy.

The tour the reader is given of, among other things, the way pirates of old chose their captains via democratic vote and how they divided authority on their ships, obeyed agreed-upon codes, and preferred free-willing shipmates to conscripts is an eye-opener.

The author describes how no predecessor democracies were as thoroughgoing as the anarchy-tinged version to be found on pirate ships. This democracy and division of power saw crews voting directly for their captains.

The constitutions agreed by the pirates also point to a remarkably strict system of governance. Requiring unanimous consent to enter into force, these constitutions made regulations, pay and punishments explicit. The historical record, the author argues, speaks for their effectiveness in that there are very few accounts of crews being abused by quartermasters.

In contrast, the situation on the merchant ships on which the pirates preyed and from the crews of which many pirates were recruited were appalling. While pirate captains would sleep in the same quarters as their crew and while the pay structure on pirate ships was flat, the author describes merchant ships as having strict hierarchies that often allowed for or even encouraged the abuse, both physical and financial, of the crew by the quartermasters and officers.

Egalitarian shipmates

A central argument of the book, which flows from the rational choice framework adopted by the author, is that the very different management and governance structures in place on pirate and merchant ships were a result of the different economic forces at work in each case. Pirate ships were owned by their crews and, among other differences, pirates needed rules regarding property that could operate without governmental supervision. In contrast, merchant ships were captained by agents hired by shore-based owners and investors, and the full weight of the law could, if deemed necessary, be brought down upon their crews.

While the author makes a good case for the necessity for considering the economic aspects of piracy in order to fully understand it, some aspects of pirate behaviour appear to elude his efforts. For example, an excellent case is made for regarding the skull and crossbones flag as a type of brand image that reduced pirates’ costs by encouraging targeted ships to surrender immediately. It had this effect since the crews of the latter knew that it was part of the code of those who hoisted it to kill all crews that put up even momentary resistance.

Yet in the following chapter the author describes some of the “heinous tortures” that pirates often unleashed on surrendering crews. In fact, it is now argued that the pirates indulged in this violence precisely in order to build a “brand name for cruelty and insanity”. That appears to contradict the flag thesis, which surely necessitates that targeted crews view pirates as fair and sane.

Since, by the author’s own admission, some of the sadism he describes cannot be justified in terms of economic theory, and given pirates’ reputation for senseless violence that the author is attempting to revise, this reader was left questioning whether the economic rational choice had anything to do with the torture and murder whatsoever.

Nor does the author apply his theories to the modern pirates of Somalia and elsewhere, who he believes bear few similarities with their peg-legged predecessors.

Still, despite passages in which it is not clear that the author’s “economic filter” is working, The Invisible Hook is a gripping read that sheds as much light on 21st century economics (with an obvious nod in the title also to the economics of Adam Smith) as it does on 17th and 18th century piracy.

With its final chapter on the “secrets of pirate management”, which is reminiscent of Gary Hamel’s recent Harvard Business School Press book The Future of Management, the author suggests ways in which the pirates’ system of organisation can be applied to modern businesses, albeit with the more blood-soaked elements safely removed.

The Invisible Hook: the hidden economics of pirates
By Peter T Leeson
Hardcover: 296pp; £14.95
Published: May 2009
Publisher: Princeton University Press
ISBN-13: 978-0691137476

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