22.1.09

TIME ON THE PLANK. An Austrian Economists writer offers a longer essay on the incentives pirates face.

But the number of confirmed, Somali pirate killings is surprisingly small—especially for a band of Kalashnikov-toting criminals. This hardly comports with our image of pirates as fiendish, blood-lusting curs. What gives? Are Somali pirates pacifists?

Hardly. But they are profit seekers. And just like their 18th-century predecessors, Somali sea dogs have discovered that it’s good business to treat their hostages decently—or at least to avoid killing them. Of course, not all pirates have been cordial with their captives. But according to several hostages, such as the Kenyan sailors one Somali pirate crew attacked in early 2007, their captors kept them well fed and even let them to send text messages to loved ones.

Pirates also respond to incentives.

In 1776 Scottish moral philosopher Adam Smith published The Wealth of Nations. In it, he described the famed “invisible hand.” According to Smith, individuals pursuing their self-interests are led, “as if by an invisible hand,” to promote others’ interests as well.

Your grocer, for example, wants to serve his own interest—he wants to make money. But to do so he must serve your interest as well. He must provide you with the highest quality groceries at the lowest possible price or you’ll patronize a competitor that does instead. The grocer doesn’t care about you, of course; he doesn’t even know you. He cares about himself, but in serving himself he serves you too.

Among Somali pirates we can observe a bastardized version of Smith’s “invisible hand,” or rather, an “invisible hook.” Pirate greed also has some laudable consequences. Pirates’ victims are of course worse off as a result of being accosted by sea bandits. And unlike legitimate businessmen’s self-interest seeking, which creates wealth, pirates’ self-interest seeking does no such thing. But conditional on victims’ capture, pirate greed saves innocents’ lives.

Pirates, like grocers, are profit-motivated. And, like grocers, to make money pirates must serve someone else’s interests too. Somali pirates’ most valuable assets are the ship, cargo, and crewmembers they take. These assets are only valuable to their owners, however, if they remain intact. Dead prisoners won’t fetch much in ransom. To maximize ransoms, then, pirates must minimize brutality toward captives.

Further, to extract loot from their victims with as little ado as possible, pirates must avoid abusing them indiscriminately. If pirate victims know they’ll be abused, or even killed, whether they comply with their attackers or not, they have no incentive to do what their attackers want.

On the other hand, if pirates reserve punishment for captives who don’t comply with their commands, resisting them becomes costly, providing a strong incentive for captives to comply, serving pirates’ ends.

These logical implications of Somali pirates’ profit-making motive explain the rarity of their recourse to murder or abuse. And they explain why 18th-century pirates often treated their compliant captives civilly as well. It was simply good business.

An important part of 18th-century sea dogs’ “pirate code,” for instance, was to show mercy to compliant prisoners. As an 18th-century pirate explained to one of his crew’s prisoners, they “observe strictly that Maxim established amongst them not to permit any ill usage to their Prisoners after Quarter given.”

Some Somali pirates have also taken to enshrining this profit-preserving policy in writing. For example, French authorities found a “pirate manual” amidst the crew they captured earlier this year, which the pirates used to regulate prisoner treatment. Like their forefathers, Somali pirates also recognize that it’s in their self-interest to respect their captives’ lives. They can make more money by restraining violence toward victims than unleashing it on them.

I may have to pick up The Invisible Hook (it goes on sale in May). The findings will probably be less controversial than those of Time on the Cross.

No comments: