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The AgeLeeson says history cannot explain all piratical paradoxes. Only economics can disentangle the different strands.
— Leon Gettler
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The Invisible Hook looks at legendary pirate captains like Blackbeard, Black Bart Roberts, and Calico Jack Rackam, and shows how pirates' search for plunder led them to pioneer remarkable and forward-thinking practices. Pirates understood the advantages of constitutional democracy—a model they adopted more than fifty years before the United States did so. Pirates also initiated an early system of workers' compensation, regulated drinking and smoking, and in some cases practiced racial tolerance and equality. Leeson contends that pirates exemplified the virtues of vice—their self-seeking interests generated socially desirable effects and their greedy criminality secured social order. Pirates proved that anarchy could be organized.
Revealing the democratic and economic forces propelling history's most colorful criminals, The Invisible Hook establishes pirates' trailblazing relevance to the contemporary world.
Economist Leeson leads readers though a surprisingly entertaining crash course in economics in this study of high seas piracy at the turn of the 18th century. Far from being the bloodthirsty fiends portrayed in popular culture, pirates created a harmonious social order; through the application of rational choice theory, the author explains how a common pursuit of individual self-interest led pirates to create self-regulating, democratic societies aboard their ships, complete with checks and balances, more than half a century before the American and French revolutions brought such models to state-level governance. Understanding the profit motive that guided pirates' actions reveals why pirates so cruelly tortured the crews of ships that resisted boarding, yet treated those who surrendered readily with the utmost respect. Both practices worked to minimize costs to the pirate crew by discouraging resistance that could lead to loss of life and limb for pirates and damage to either the pirates' ship or the cargo aboard. Illustrated with salty tales of pirates both famous and infamous, the book rarely bogs down even when explaining intricate economic concepts, making it a great introduction to both pirate history and economic theory. (June)Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
But the people at Princeton University Press know something that disconsolate losers of the Great Recession too quickly forget. The economic libertarianism that brought us this debacle is at the heart of the American Dream. Times will be tough, but no one in Washington is going to shackle our freedom to enrich ourselves, any more than Disney will dump the Pirates of the Caribbean franchise. Why shackle imagination, enterprise, risk taking? Think of the sequel.
Be that as it may, Peter T. Leeson, an economics professor at George Mason University, has given us an engaging twofer of a book. On the one hand we have his guided tour through the grisly business practices of maritime bandit captains like Blackbeard, "Calico" Jack Rackam, Edward England, Bartholomew Roberts, William Kidd, William Taylor, William Fly, and dozens of other entrepreneurial seafarers who preyed on Atlantic and Caribbean shipping in the golden age of piracy, between 1716 and 1726.
On the other hand is Leeson's guidance to the economic underpinnings of this swashbuckling age, in effect a sprightly presentation of some rudiments of Microeconomics 101. Pausing before some particularly ghastly piratical practice -- the brutality, say, that was often visited upon crew and passengers who tried to hide valuables from the "invisible hook" -- Leeson discourses on the miraculous power of the profit motive. Ordinary folk, beguiled by the darker corners of human psychology, might suppose that pirates who did things like tear the living heart out of a prisoner, then roast and eat it before the others, was a psychopathic killer, clinically depressed, with tendencies to necrophilia. Economics, Leeson tells us, has a simpler explanation: the man is merely building his business's reputation for having a "high discount rate," thereby discouraging future clients from offering resistance to the sales pitch.
While Microeconomics 101 is Leeson's main source of amusing piracy analogies, The Federalist Papers is another. It appears that governance aboard a pirate ship was not at all what you might imagine -- a tyranny modified by anarchy. To Leeson, rather, it resembles a more familiar arrangement: a democracy. Captains were elected and could be deposed by vote, and their powers were clearly confined to prize taking and other emergency decisions; justice was the province of the quartermaster, also elected, who ensured the proper (nearly communistic) distribution of booty among the crew, and other less vital matters. Leeson does not shy from discerning in these arrangements a harbinger of the U.S. Constitution.
If Leeson's book belongs to a genre, it is the genre that beguiles millions even now at the end, some say, of capitalism. I mean the "business book," specifically books that probe the writings or careers of great men (no women that I know of) for tips on how to manage or rescue firms and grow them to stratospheric heights of success. The Invisible Hook is not a neat fit in this company: Leeson's repeated analogizing between microeconomics and piracy, and back again, rather confuses the question of who's tipping whom. The tips themselves, however, stand out clearly. One that fascinated me was the aforementioned usefulness of cruelty in the business plan.
I thought immediately, as Leeson might have done, of the very different business practice of the pirates currently raiding sea lanes off the coast of Somalia. Their profits are so huge -- millions of dollars per prize -- as to make their 18th-century predecessors drool. The magnitude of the booty is new, but offshore robbery and shipnapping are not. Opportunity beckons wherever transport costs oblige merchant vessels to sail temptingly close to shore, as around Somalia's Puntland, or to navigate narrow waterways such as the Malacca Straits between Peninsular Malaysia and the (Indonesian) island of Sumatra, or the Strait of Gibraltar between Spain and Morocco. Straits are never dire for maritime banditry, especially where some degree of lawlessness, what Leeson might term "weak market regulation," obtains in neighboring states. Somalia is perfect in this respect, as its business environment lacks any regulations at all -- or, for that matter, any state.
Lawlessness, curiously enough, accounts for one of the cruelest "best practices" of Leeson's pirates, the savagery they visited upon the top officers of certain merchant ships. Many pirates had been merchant seamen themselves before turning to the high-risk, high-return business whose logo was the Jolly Roger. And many bore the scars, often on their backs, of the unconstrained violence with which some captains maintained discipline. What the pirates, as victims of that violence, did on the happy occasion of snaring one of these officers was for them simply an act of retributive justice. The idea seems to have been the noble one of improving outrageous working conditions in the maritime transport industry.
Somali pirates, however, respond somewhat differently to the lawlessness of their seas. They too see themselves as bringers of order and justice. "Think of us like a Coast Guard," one imprisoned pirate explained to a New York Times reporter in Puntland. "We don't consider ourselves sea bandits. Sea bandits are those who illegally fish in our waters and dump wastes in our seas..." One economist, much as Leeson again might have done had he looked into this matter, has asked us to think of the fish issue as a "resource swap" -- $100 million a year in ransomed ships, over against $200 million a year in poached fish for Asian markets. Not a good deal for the Somalis, one might argue. But the balance of trade may be shifting to the pirates: in the first six months of 2009 alone there have been 126 raids on shipping off the Somali coast, including 44 sea-jackings, setting the 15-year-old industry -- already five years longer than the golden age -- on the road to doubling 2008 revenues.
It turns out, however, that the secret of Somali piracy turns on that crucial factor in the 18th-century way of doing business in a lawless marketplace, cruelty. The Somalis don't practice it, and for the same reason that Blackbeard did, a keen regard for the bottom line. Killing and maiming unarmed crew members, even officers, would result in the arming of the freighters, tankers, and yachts on which the sea bandits prey. An arms race would ensue, and not a bloodless one. And so, for the moment, the pirates and the navies of 24 offended nations suffer an unacknowledged stand-off, with neither side -- except, once, on the American side -- daring to break it.
I wouldn't recount this three-century update of piratical business behavior if it weren't for a curious omission in Leeson's book -- curious because it speaks so well of his fond capitalism's moral development.
In all the great 16th-, 17th-, and 18th-century debates over which polity best meets the needs of mankind, one point was repeatedly made by proponents of representative government and unfettered -- that is, no mercantilism -- business enterprise. The point was that state power and wealth power were not safe in the hands of monarchs and aristocrats. Their innate pride and quarrelsomeness had led, and inevitably would lead, to endless wars, within and between nations and empires. Far better, it was argued, to vest the middling, and one day even the lower classes, with access to both forms of power: the theory being that they would be too busy making a living to think of making war. Peace would reign. An overly optimistic prediction, as we know. Still, in the seas off Somalia, the fragile peace amid frantic commerce represents some sort of triumph of modern polities, and Leeson should have hailed it.
I recommend The Invisible Hook nonetheless -- for sober libertarians who need to brush up their laissez-faire economics, and for pirate fans in need of sobering by a lighthearted practitioner of the dismal science. --Nelson Aldrich, Jr.
Nelson Aldrich, Jr. is the author of George, Being George: George Plimpton's Life as Told, Admired, Deplored, and Envied by 200 Friends, Relatives, Lovers, Acquaintances, Rivals -- and a Few Unappreciative Observers and Old Money: The Mythology of Wealth in America. A former editor at the Paris Review and Harper's, his writings appear in numerous publications.
Charybdis herself must have spat them into the sea. They committed "a Crime so odious and horrid in all its Circumstances, that those who have treated on that Subject have been at a loss for Words and Terms to stamp a sufficient Ignominy upon it." Their contemporaries called them "Sea-monsters," "Hell-Hounds," and "Robbers, Opposers and Violators of all Laws, Humane and Divine." Some believed they were "Devils incarnate." Others suspected they were "Children of the Wicked One" himself. "Danger lurked in their very Smiles."
For decades they terrorized the briny deep, inspiring fear in the world's most powerful governments. The law branded them hostes humani generis-"a sort of People who may be truly called Enemies to Mankind"-and accused them of aiming to "Subvert and Extinguish the Natural and Civil Rights" of humanity. They "declared War against all the World" and waged it in earnest. Motley, murderous, and seemingly maniacal, their mystique is matched only by our fascination with their fantastic way of life. "These Men, whom we term, and not without Reason, the Scandal of human Nature, who were abandoned to all Vice, and lived by Rapine" left a mark on the world that remains nearly three centuries after they left it. They are the pirates, history's most notorious criminals, and this is the story of the hidden force that propelled them-the invisible hook.
Adam Smith, Meet "Captain Hook"
In 1776 Scottish moral philosopher Adam Smith published a landmark treatise that launched the study of modern economics. Smith titled his book, An Inquiry into the Nature and Causes of the Wealth of Nations. In it, he described the most central idea to economics, which he called the "invisible hand." The invisible hand is the hidden force that guides economic cooperation. According to Smith, people are self-interested; they're interested in doing what's best for them. However, often times, to do what's best for them, people must also do what's best for others. The reason for this is straightforward. Most of us can only serve our self-interests by cooperating with others. We can achieve very few of our self-interested goals, from securing our next meal to acquiring our next pair of shoes, in isolation. Just think about how many skills you'd need to master and how much time you'd require if you had to produce your own milk or fashion your own coat, let alone manufacture your own car.
Because of this, Smith observed, in seeking to satisfy our own interests, we're led, "as if by an invisible hand," to serve others' interests too. Serving others' interests gets them to cooperate with us, serving our own. The milk producer, for example, must offer the best milk at the lowest price possible to serve his self-interest, which is making money. Indirectly he serves his customers' self-interest, which is acquiring cheap, high-quality milk. And on the other side of this, the milk producers' customers, in their capacity as producers of whatever they sell, must offer the lowest price and highest quality to their customers, and so on. The result is a group of self-interest seekers, each narrowly focused on themselves but also unwittingly focused on assisting others.
Smith's invisible hand is as true for criminals as it is for anyone else. Although criminals direct their cooperation at someone else's loss, if they desire to move beyond one-man mug jobs, they must also cooperate with others to satisfy their self-interests. A one-man pirate "crew," for example, wouldn't have gotten far. To take the massive hauls they aimed at, pirates had to cooperate with many other sea dogs. The mystery is how such a shifty "parcel of rogues" managed to pull this off. And the key to unlocking this mystery is the invisible hook-the piratical analog to Smith's invisible hand that describes how pirate self-interest seeking led to cooperation among sea bandits, which this book explores.
The invisible hook differs from the invisible hand in several respects. First, the invisible hook considers criminal self-interest's effect on cooperation in pirate society. It's concerned with how criminal social groups work. The invisible hand, in contrast, considers traditional consumer and producer self-interests' effects on cooperation in the marketplace. It's concerned with how legitimate markets work. If the invisible hand examines the hidden order behind the metaphorical "anarchy of the market," the invisible hook examines the hidden order behind the literal anarchy of pirates.
Second, unlike traditional economic actors guided by the invisible hand, pirates weren't primarily in the business of selling anything. They therefore didn't have customers they needed to satisfy. Further, piratical self-interest seeking didn't benefit wider society, as traditional economic actors' self-interest seeking does. In their pursuit of profits, businessmen, for example, improve our standards of living-they make products that make our lives better. Pirates, in contrast, thrived parasitically off others' production. Thus pirates didn't benefit society by creating wealth; they harmed society by siphoning existing wealth off for themselves.
Despite these differences, pirates, like everyone else, had to cooperate to make their ventures successful. And it was self-interest seeking that led them to do so. This critical feature, common to pirates and the members of "legitimate" society, is what fastens the invisible hook to the invisible hand.
The Invisible Hook applies the "economic way of thinking" to pirates. This way of thinking is grounded in a few straightforward assumptions. First, individuals are self-interested. This doesn't mean they never care about anyone other than themselves. It just means most of us, most of the time, are more interested in benefiting ourselves and those closest to us than we're interested in benefiting others. Second, individuals are rational. This doesn't mean they're robots or infallible. It just means individuals try to achieve their self-interested goals in the best ways they know how. Third, individuals respond to incentives. When the cost of an activity rises, individuals do less of it. When the cost of an activity falls, they do more of it. The reverse is true for the benefit of an activity. When the benefit of an activity rises, we do more it. When the benefit falls, we do less of it. In short, people try to avoid costs and capture benefits.
Economists call this model of individual decision making "rational choice." The rational choice framework not only applies to "normal" individuals engaged in "regular" behavior. It also applies to abnormal individuals engaged in unusual behavior. In particular, it applies to pirates. Pirates satisfied each of the assumptions of the economic way of thinking described above. Pirates, for instance, were self-interested. Material concerns gave birth to pirates and profit strongly motivated them. Contrary to pop-culture depictions, pirates were also highly rational. As we'll examine later in this book, pirates devised ingenious practices-some they're infamous for-to circumvent costs that threatened to eat into their profits and increase the revenue of their plundering expeditions. Pirates also responded to incentives. When the law made it riskier (and thus costlier) to be a pirate, pirates devised clever ways to offset this risk. When pirates offered crew members rewards for superlative pirating, crew members worked harder to keep a lookout for the next big prize, and so on.
It's not just that economics can be applied to pirates. Rational choice is the only way to truly understand flamboyant, bizarre, and downright shocking pirate practices. Why, for example, did pirates fly flags with skulls and crossbones? Why did they brutally torture some captives? How were pirates successful? And why did they create "pirate codes"? The answers to these questions lie in the hidden economics of pirates, which only the rational choice framework can reveal. History supplies the "raw material" that poses these questions. Economics supplies the analytical "lens" for finding the answers.
When we view pirates through this lens, their seemingly unusual behavior becomes quite usual. Strange pirate behavior resulted from pirates rationally responding to the unusual economic context they operated in-which generated unusual costs and benefits-not from some inherent strangeness of pirates themselves. As remaining chapters of this book illustrate, a pirate ship more closely resembled a Fortune 500 company than the society of savage schoolchildren depicted in William Golding's Lord of the Flies. Peglegs and parrots aside, in the end, piracy was a business. It was a criminal business, but a business nonetheless, and deserves to be examined in this light.
Avast, Ye Scurvy Dogs
Many discussions of pirates use the terms pirates, buccaneers, privateers, and corsairs interchangeably. There's a reason for this; all were kinds of sea bandits. But each variety of sea bandit was different. Pure pirates were total outlaws. They attacked merchant ships indiscriminately for their own gain. Richard Allein, attorney general of South Carolina, described them this way: "Pirates prey upon all Mankind, and their own Species and Fellow-Creatures, without Distinction of Nations or Religions." Eighteenth-century sea bandits were predominantly this ilk.
Privateers, in contrast, were state-sanctioned sea robbers. Governments commissioned them to attack and seize enemy nations' merchant ships during war. Privateers, then, weren't pirates at all; they had government backing. Similarly, governments sanctioned corsairs' plunder. The difference is corsairs targeted shipping on the basis of religion. The Barbary corsairs of the North African coast, for instance, attacked ships from Christendom. However, there were Christian corsairs as well, such as the Knights of Malta. This book's discussion primarily excludes privateers and corsairs since they typically weren't outlaws.
Buccaneers, in contrast, typically were. The original buccaneers were French hunters living on Hispaniola, modern-day Haiti, in the early seventeenth century. Although they mostly hunted wild game, they weren't opposed to the occasional act of piracy either. In 1630 the buccaneers migrated to Tortuga, a tiny, turtle-shaped island off Hispaniola, which soon attracted English and Dutch rabble as well. Spain officially possessed Hispaniola and Tortuga and wasn't fond of the outlaw settlers. In an effort to drive them away, the Spanish government wiped out the wild animals the hunters thrived on. Instead of leaving, however, the buccaneers began hunting a different sort of game: Spanish shipping.
In 1655 England wrested Jamaica from the Spaniards and encouraged the buccaneers to settle there as a defense against the island's recapture. Buccaneers spent much of their time preying on Spanish ships laden with gold and other cargo sailing between the mother country and Spain's possessions in the Americas. Many of these attacks were outright piracy. But many others were not. Eager to break Spain's monopoly on the New World under the Treaty of Tordesillas (1494), England and France commissioned these sea rovers as privateers to harass Spain. "Buccaneering," then, "was a peculiar blend of piracy and privateering in which the two elements were often indistinguishable." However, since "the aims and means of [buccaneering] operations were clearly piratical," it's standard to treat the buccaneers as pirates, or at least protopirates, which I do in this book.
Although buccaneers weren't pure pirates, they anticipated and influenced pure pirates' organization in the early eighteenth century. Because of this, it's important to draw on them at various points, as I do, throughout my discussion. The same is true of the Indian Ocean pirates operating from about 1690 to 1700. These sea rovers represent a bridge between the more privateerlike buccaneers and the total-outlaw pirates active from 1716 to 1726. In the late seventeenth century, the Indian Ocean pirates, or "Red Sea Men" as their contemporaries sometimes called them, settled on Madagascar and its surrounding islands where they were well situated to prey on Moorish treasure fleets. For the most part, Indian Ocean pirates were pirates plain and simple. But some of them sailed under a veneer of legitimacy, which their successors abandoned completely. While this book covers pirates from about 1670 to 1730, it focuses on the final stage of the great age of piracy (1716-26) when men like Blackbeard, Bartholomew Roberts, and "Calico" Jack Rackam prowled the sea.
Jamaican governor Sir Nicholas Lawes described these sea scoundrels as "banditti of all nations." A sample of seven hundred pirates active in the Caribbean between 1715 and 1725, for example, reveals that 35 percent were English, 25 percent were American, 20 percent were West Indian, 10 percent were Scottish, 8 percent were Welsh, and 2 percent were Swedish, Dutch, French, and Spanish. Others came from Portugal, Scandinavia, Greece, and East India.
The pirate population is hard to precisely measure but by all accounts was considerable. In 1717 the governor of Bermuda estimated "by a modest computation" that 1,000 pirates plied the seas. In 1718 a different official estimated the pirate population to be 2,000. In 1720 Jeremiah Dummer reported 3,000 active pirates to the Council of Trade and Plantations. And in 1721 Captain Charles Johnson suggested that 1,500 pirates haunted the Indian Ocean alone. Based on these reports and pirate historians' estimates, in any one year between 1716 and 1722 roughly 1,000 to 2,000 sea bandits prowled the pirate-infested waters of the Caribbean, Atlantic Ocean, and Indian Ocean. This may not seem especially impressive. But when you put the pirate population in historical perspective it is. The Royal Navy, for example, employed an average of only 13,000 men in any one year between 1716 and 1726. In a good year, then, the pirate population was more than 15 percent of the navy's. In 1680 the entire population of the North American colonies was less than 152,000. In fact, as late as 1790, when the first national census was taken, only twenty-four places in the United States had populations larger than 2,500.
Many pirates lived together on land bases, such as the one Woodes Rogers went to squelch at New Providence in the Bahamas in 1718. However, the most important unit of pirate society, and the strongest sense in which this society existed, was the polity aboard the pirate ship. Contrary to most people's images of pirate crews, this polity was large. Based on figures from thirty-seven pirate ships between 1716 and 1726, the average crew had about 80 members. Several pirate crews were closer to 120, and crews of 150 to 200 weren't uncommon. Captain Samuel Bellamy's pirate crew, for example, consisted of "200 brisk Men of several Nations." Other crews were even bigger than this. Blackbeard's crew aboard Queen Anne's Revenge was 300-men strong. In contrast, the average two-hundred-ton merchant ship in the early eighteenth century carried only 13 to 17 men.
Furthermore, some pirate crews were too large to fit in one ship. In this case they formed pirate squadrons. Captain Bartholomew Roberts, for example, commanded a squadron of four ships that carried 508 men. In addition, pirate crews sometimes joined for concerted plundering expeditions. The most impressive fleets of sea bandits belong to the buccaneers. Buccaneer Alexander Exquemelin, for example, records that Captain Morgan commanded a fleet of thirty-seven ships and 2,000 men, enough to attack communities on the Spanish Main. Elsewhere he refers to a group of buccaneers who "had a force of at least twenty vessels in quest of plunder." Similarly, William Dampier records a pirating expedition that boasted ten ships and 960 men. Though their fleets weren't as massive, eighteenth-century pirates also "cheerfully joined their Brethren in Iniquity" to engage in multicrew pirating expeditions.
Excerpted from THE INVISIBLE HOOK by PETER T. LEESON Copyright © 2009 by Princeton University Press. Excerpted by permission.
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Preface and Acknowledgments xiii
Chapter 1: The Invisible Hook 1
Chapter 2: Vote for Blackbeard
The Economics of Pirate Democracy 23
Chapter 3: An-arrgh-chy
The Economics of the Pirate Code 45
Chapter 4: Skull & Bones
The Economics of the Jolly Roger 82
Chapter 5: Walk the Plank
The Economics of Pirate Torture 107
Chapter 6: Pressing Pegleg
The Economics of Pirate Conscription 134
Chapter 7: Equal Pay for Equal Prey
The Economics of Pirate Tolerance 156
Chapter 8: The Secrets of Pirate Management 176
Epilogue: Omnipresent Economics 194
Postscript: You Can't Keep a Sea Dog Down The Fall and Rise of Piracy 197
Where This Book Found Its Buried Treasure A Note on Sources 207
Posted January 17, 2011
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