Last year in Ideas, Joanna Weiss wrote that the George Mason economist Peter T. Leeson was at work on a book that would demonstrate that "the democratic tenets we hold so dear were used to great effect on pirate ships. Checks and balances. Social insurance. Freedom of expression."
Leeson's book is finally here, "The Invisible Hook: The Hidden Economics of Pirates." And, true enough, the economist gives democratic aspects of pirate life their due. (Pirates elected their captains, for example, and could depose them by a vote.) But what most stands out is just how eager Leeson is to rescue pirates from the clutches of left-wing historians and social theorists, and to claim them as avatars of right-wing economic theory. Pirates, Leeson suggests, were avid Hayekians a full two centuries before the Austrian economist Friedrich Hayek was born.
From the 19th-century Christian socialist Charles Kingsley, who wrote a romanticizing poem about pirates, to the University of Pittsburgh historian Marcus Rediker, leftists have hailed pirate ships as spaces of social experimentation in which race and class hierarchies were softened or upended. Leeson, however, argues that democracy and racial tolerance grew out of piratical self-interest, and had zero to do with utopian sentiment.
Take the election of captains. For Leeson, this is an opportunity to explain a dilemma familiar to economists: the "principal
ple-agent problem." Merchant ships, he explains, were owned by absentee capitalists. ("They were landlubbers.") As a result, the interests of the agents, or doers (the sailors) did not align with those of the principals ples, or owners. In order to keep sailors working, and to prevent them from siphoning off goods and profits, an autocratic captain was required.
In contrast, pirates stole their ships and afterwards shared ownership. They divided up any booty. There was no problem of misalignment: the principals
ples were the agents, (To be sure, the pirates elected a captain in part to make sure that no one slacked off, but the incentive to shirk was lower on a pirate ship, as you'd partly be cheating yourself.)
The lesson, for Leeson, is not that workers' democracy is a good thing, per se, but merely that it can make sense in a highly specific and rare economic situation, one with a distinctive set of incentives. Today, for example, some variant of democratic decisionmaking might make sense in a small start-up in which everyone has money at risk. It would not make sense, he says, in a company that makes use of outside capital.
For further reading that will clarify why he's right about pirate democracy and Rediker is wrong, Leeson recommends Hayek's essay "The Use of Knowledge in Society," as well as "Socialism," by Ludwig von Mises.
PS Obligatory pirate-talk joke: one chapter is titled "An-ARRGH-chy: The economics of the pirate code."
PPS Most inadvertently funny sentence: "There is evidence, on the other hand, that at least some pirates were not gay."
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