An-arrgh-chy: The Law and Economics of Pirate Organization

Author: Peter T. Leeson
Affiliation: George Mason University
Published in: Journal of Political Economy
Date: 2007, Volume 115, No. 6
ISSN: 0022-3808
Published by: The University of Chicago
Comments and Acknowledgments: Acknowledges Steven Levitt, anonymous referees, and several colleagues for their comments and suggestions. Financial support from Kendrick Fund and Kaplan Fund is acknowledged.

Historical Pirate Organization:
- Common perceptions portray pirates as chaotic and reckless.
- Reality highlighted pirates as highly organized criminals with their own governance systems.
- Unlike fictional portrayals, historical pirates exhibited sophisticated organization and coordination.
- Despite lacking government support, pirates successfully cooperated with numerous others in their activities.
- Shared a remarkable level of harmony despite the potential for conflict, akin to lawful societies.
Key Questions:
- How did pirates, considered the “Scandal of human Nature”, maintain such order?
- Investigates the institutions pirates devised to facilitate order and cooperation, particularly:
1. Piratical checks and balances to prevent captain predation.
2. Democratic constitutions to minimize conflicts and establish a code of necessary laws.
Literature Context:
- Previous research focused on criminal organization economics, but internal governance structures received limited attention.
- Works considered include that by Becker (1968), Fiorentini and Peltzman (1995), and studies on Mafia dynamics by Gambetta and Reuter.
- Claims that pirates faced unique governance challenges due to their illegal status and absence of formal legal enforcement mechanisms.

Pirate Geography and Activity (Seventeenth-Eighteenth Centuries):
- Primarily terrorized seas around the Caribbean, Atlantic, and Indian Oceans.
- Significant areas included the Bahamas, waters between Europe and North America, and routes between Cuba and Haiti.
- Notable routes, termed the “pirate round,” facilitated extensive sprees of plunder.
Golden Age of Piracy:
- Lasted from roughly 1690 to 1730, with peaks between 1716 and 1722.
- Famous individuals included Blackbeard (Edward Teach) and Bartholomew Roberts.
Diversity Among Pirates:
- Sample of 700 pirates (1715-1725):
- 35% English, 25% American, 20% West Indian, etc.
- Racial composition varied, with estimates indicating 25-30% of crews were of African descent.
- Total count ranged from 1,000 to 2,000 pirates in specific operational years, with crew sizes from 80 to 200 on average, and in some cases even larger.
Comparison to Merchant Ships:
- Merchant ships exhibited autocratic organization, which provided stability but created a risk of captain predation against seamen.

Inefficiencies of Leadership Structure:
- Hierarchical organization with captains wielding considerable power.
- Incentives for captains to govern strictly to avert opportunism by seamen due to absence of direct supervision from owners.
Prevention Against Opportunism:
- Sailors incentivized through fixed wages, suffered from limited supervision leading to a principal-agent problem.
- Autocracy provided improved oversight, which merchants rationalized through selection of trustworthy captains and retention through voting for captaincy.
- Captain's authority often resulted in predation on sailors, fueled by potential for abuse resulting from unlimited power.
Risks and Instances of Captain Predation:
- Forms of predation included salary docking, ration cutting, and abusive discipline, highlighted through personal accounts and documents from historical records, demonstrating a systemic risk rather than isolated events.

Absence of Owner-Crew Principal-Agent Problem:
- Pirates lacked absentee ownership, leading to the need for democratic organization instead of autocracy.
- Pirates required captains for coordination but managed through joint ownership leading to early democratic governance.
Democratic Systems Aboard Pirate Ships:
- Pirates created a system ensuring checks on captain authority through the election of quartermasters who retained significant power without full authority.
Checks and Balances Established:
- The laws governing pirates established systems for conflict resolution, punishment, and loot division, essential for maintaining order.
- Captains retained authority during combat but quartermasters dealt with internal issues, showing a model of balanced power dynamics.

Origin and Structure of Pirate Articles:
- Pirates adopted written constitutions—known as articles of agreement.
- Articles defined laws governing behavior, loot distribution, and punishments emphasizing fairness without autocratic control.
Enforcement and Adherence:
- Pirates displayed adherence to articles akin to democratic systems but self-enforced due to illegitimate status.
- Each pirate had a voice in rule-making, which contributed to successful collective behavior and reduced conflicts, underscoring the efficiency of their organization.

Comparative Analysis with Modern Piracy:
- Current forms of piracy exhibit lesser organizational complexities as they mostly involve small, fast-moving groups with minimal social interaction and structured governance.
- Reflects that the historical pirate system provided a cooperative foundation essential for successful, extended criminal enterprises in contrast to modern dynamics.
Broader Implications for Governance Constructs:
- Pirates developed governance mechanisms to address internal predation issues, providing insights into self-organized productive governance solutions in absence of formal legal structures.