Rational Pirates? The Hidden Economics of History’s Most Notorious Criminals

News Abroad

Mr. Leeson is BB&T Professor for the Study of Capitalism at George Mason University and author of the new book, The Invisible Hook: The Hidden Economics of Pirates (Princeton University Press).

Few characters in history inspire as much fascination or mystery as pirates. For this reason pirates make perfect fodder for pop-culture, which typically depicts sea scoundrels as irrational, if entertaining, characters. Pirates’ apparent madness isn’t purely the product of Hollywood producers, however. A cursory examination of pirate history seems to confirm pirate madness as well. What else are we to make of pirates’ seemingly irrational destruction of cargo, gruesome tortures, and even their flamboyant flag of skull-and-bones?

Each of these practices is a genuine part of early 18th-century pirates’ history. But could these and other infamous pirate behaviors be rational?

In my new book, The Invisible Hook: The Hidden Economics of Pirates, I argue that they are. Pirates were businessmen; they were in it for the money. And each of their seemingly strange behaviors contributed to their bottom line, which is why they engaged in them.

Consider, for instance, pirates’ infamous flag, the Jolly Roger. It seems strange that outlaws seeking to avoid the authorities’ detection would loudly announce their presence with an unmistakable ensign of skull-and-bones. But beneath this irrational patina lay cunning, piratical business smarts.

Pirates weren’t the only sea scoundrels operating in the Caribbean in the early 18th century. State-sanctioned Spanish and French “coast guard” ships trolled these waters as well. This posed a potential problem for pirates. Because of their legal status, coast guard ships were constrained in how violent they could be toward (allegedly interloping) merchant ships they accosted. Because of their outlaw status, pirates, in contrast, were totally unconstrained in this regard. That meant that between the two, pirates were the more fearsome belligerents, and thus the more important to surrender to if you were a merchantman.

Why did this matter? Because a major cost of doing business for pirates was battling prospective prizes. Contrary to popular portrayal, pirates didn’t look forward to fighting their quarries; they sought to avoid conflict whenever they could because it eroded their profits. If pirates had to engage their prey with booming cannon and clashing cutlasses, some of their own might be injured or killed in the contest. Battle could also damage the pirates’ ship, or worse yet, damage the prize.

To keep costs down pirates therefore needed to minimize violent conflicts with their prey. Since pirates typically outmanned and outgunned their prey by a factor or three or more, it wasn’t hard to encourage merchantmen’s peaceful surrender . . . if merchantmen knew their attackers were pirates as opposed to coast guard vessels.

Ultimately, then, to conserve on the costs of conflict, pirates needed a way to identify themselves to their prey and distinguish themselves from coast guard attackers. What better way to do this than to fly a flag depicting the strength, death, and destruction they could unleash if they were resisted? Enter the Jolly Roger.

The Jolly Roger was a well-known symbol of piracy. For pirates, this wasn’t a problem. Their punishment if they were captured was the same whether they flew the Jolly Roger or not—the hangman’s noose. But coast guards were reluctant to adopt this flag since doing so would place them beyond the bounds of the law. Flying the Jolly Roger would make coast guard vessels pirates and thus render their otherwise legitimate enterprise punishable under the law.

Because of this, pirates could use the Jolly Roger to communicate their pirate status, while coast guards tended not to fly the pirate flag. When a merchantman saw the black flag, it could reasonably conclude its attacker was a pirate, which it knew it shouldn’t resist, allowing pirates to take the prize without a costly fight.

Pirates’ seeming “madness” when interacting with legitimate members of society has a similar rational, and economic, foundation. After pirates secured the peaceful surrender of their quarries at the sight of the Jolly Roger, their work wasn’t done. They still had to locate loot on board. The problem was that merchant sailors were naturally reluctant to give their booty up to their pirate attackers. Some tried to hide their valuables. Others resorted to destroying them.

To prevent this, pirates did what you might expect . . . if they were rational businessmen: they fostered an image of themselves so terrifying that few would dare to do anything other than to immediately yield their valuables up to their pirate captors.

One way pirates created a terrifying reputation was by ruthlessly dealing with prisoners they caught hiding or destroying booty. This is where most stories of pirate brutality come from. Some pirates were sadists. But most were simply cunning businessmen. They understood that indiscriminately brutalizing captives would not only not help them achieve their goals; it would actually undermine their goals. If sailors came to expect torture whether they cooperated with the pirates or not, they wouldn’t have an incentive to cooperate, leading to the very hiding and destruction of booty pirates sought to avoid.

Thus, rather than torturing prisoners wantonly, many pirates treated cooperative captives more kindly. In some cases they even showed generosity to compliant captives, no doubt to encourage others to peacefully yield to them in the future.

Another way pirates fostered a terrifying image was by displaying a “devil-may-care” attitude to those they encountered. They threw goods they didn’t want overboard, engaged in seemingly senseless destruction, and openly declared to captives that they feared neither God nor the law. Sailors led by such pirate posturing to believe that pirates might fly off the handle if they weren’t satisfied were naturally more inclined to comply with pirate demands, enhancing pirates’ profit.

Strange as it may seem, far from irrational, pirates were as clever and calculating as any contemporary entrepreneur. The unusual (and entertaining!) behaviors we know pirates for weren’t the result of an inherent unusualness in pirates themselves. They were the result of rational pirate profit seeking in the rather unusual economic context pirates operated in.