E20 -

Are all human beings merely economic maximizers? Can all human actions really be explained in terms of profit, loss, and calculation?

Peter Leeson is the Duncan Black Professor of Economics and Law at George Mason University. His work often reads as forays into high weirdness, voyages to strange unknown countries penetrated only by the light of economic reasoning.

Leeson, The Invisible Hook: The Hidden Economics of Pirates. Princeton University Press. 2011.

WTF?! An Economic Tour of the Weird. Stanford University Press. 2017.


Anthony Comegna: Peter Leeson is the Duncan Black Professor of Economics and Law at George Mason University. His work often reads as forays into high weirdness, voyages to strange unknown countries penetrated only by the light of economic reasoning. Even pirates weighed alternatives, considered options, and acted according to their interests. But were Golden Age pirates merely economic maximizers? Can all human actions, even the bizarre or suicidal, really be explained in terms of profit, loss, and calculation?
Welcome to Liberty Chronicles, a project of lib​er​tar​i​an​ism​.org. I’m Anthony Comegna.
In pop culture at least, there are lots of views of pirates or presentations of pirates that seem to think of them as bloodlusting, overly passionate, emotion‐​driven people who don’t go through any kind of rational calculation process in their behavior. They’re red in the eyes or something, and they go wild until they have a short life and marry. But even there, you say there is plenty of rationality. It totally structures their world, and all you have to do is understand them better and suddenly their seemingly bizarre ways of life and practices make perfect sense.
Peter Leeson: Yeah, that is accurate. And I would just say with respect to that, note that a pirate or anyone else, for example, being filled with bloodlust would not in any way imply irrationality. I don’t think that is true about pirates, which we can come to in a moment. But that wouldn’t imply rationale. Bloodlust would imply that my goal is to, say, hurt people. Rationality just says that I’m trying to hurt people as effectively as I can.
Anthony Comegna: So as you said, it’s about goals. Having the goal never leaves. We always have something that we’re acting for.
Peter Leeson: Yeah. Yeah, there is a goal. There is some goal, whatever it is, and then there’s us trying to achieve it. And achieving it doesn’t require that we sit there with calculators and Excel spreadsheets and weigh costs and benefits. So rationality isn’t a claim about how people calculate, for example, or how smart they are. It just says that they’re trying their best. Maybe the best that they can do is to simply react to whatever emotions that they feel. That’s entirely possible. But it’s saying that they’re just doing the best that they can, and the best that they can might to be very good for a variety of reasons.
So I just want to distinguish what the rational choice approach that I’m applying is doing vis‐​à‐​vis the alternatives. In other words, in a way, I don’t think there is an alternative that cannot be in some way admitting that somebody has a goal of it’s going to analyze their behavior and then think about how they’re doing. No, it might not do that explicitly. It might not articulate the logic, and I think that’s a shortcoming of approaches that do that. But it doesn’t seem to me that we can actually deny people having goals and then deny doing things with respect to those goals, which is all that we’re saying with rationality.
Anthony Comegna: Okay. So now, let’s get into who these people were. Historians usually mark out, say, the decades 1650 to the 1720s as the Golden Age of Piracy in the Atlantic. Who were these people? And let’s do some exploring of them from below. Who were they? Where’d they come from? What were their lives like?
Peter Leeson: I focus primarily on pirates of the early 18th century, but the answer is largely the same for those of the 17th century as well, and that is that they were primarily, although not exclusively, they were primarily sailors who either came from the merchant marine or came from the navy, which could be the public part of the navy, as being on an actual Royal Navy ship, or on the sort of private wing of the navy. There were these ships, as you know, called privateers, which were essentially private warships, and pirates could come from those as well. So these were seafaring guys.
With respect to merchant sailors, when a pirate crew overtook a merchant ship, if it was looking for recruits, it would often extend the option to the merchant sailors who were on board if any of them wanted to join. And sometimes those merchant sailors did, and so that’s one chief way that merchant sailors became pirates. Another way they did so was to actually mutiny against their merchant ship captain and to turn the crew pirates, so instead of shipping goods across the ocean, they would decide that they would try their hand at attacking other ships that were carrying goods across the ocean and stealing their stuff.
With respect to the navy and privateers, the situation worked similarly. There was a mutiny possibility by which sailors on those ships could turn pirate. But a perhaps more significant way in which they did so was when wars ended. So in 1714, the War of the Spanish Succession ended, and a lot of guys or at least some guys who were sailing on naval ships or privateers were out of work. And the activities of privateering in particular are essentially identical to the activities of piracy. So naturally, these guys looking for alternative forms of work and not seeing very good prospects in their alternative, legitimate employments on land where they wouldn’t earn very much money, some of them at least decided to roll the dice and take up piracy.
Anthony Comegna: So there’s a build up by these new nation‐​states, especially say like after Westphalia, where they’re not going to destroy each other. They’re just calculating the balance of power worldwide, and they’re trying to get the edge over each other across these extended empires. And they throw all their sailors out of work periodically during peacetime. How do sailors then actually go through the decision to turn pirate?
Peter Leeson: I think that they make the decision as a simple employment decision in the same way that a regular person makes, and by that I mean a non‐​pirate in our time in 2017, makes the decision about what line of work they’re going to go into. Perhaps the closest analogy or the best way to think about it is to think about how is it that members of a contemporary, say, criminal gang like MS-13, which is all over the news right now. I’ve sure you’ve seen about it. This Latin American gang, apparently primarily members come from I think El Salvador it is, and they’re engaged in drug smuggling and human trafficking and extortion and murder.
So how is that they come to become members of these gangs? The way that they do so, which I think is again the same logic that sailors made when it came to piracy, was to weigh costs and benefits, at least implicitly. Again, it doesn’t require a calculator, but to think about, “Well, my alternative employment yields a very low wage and doesn’t have a very nice work life element to it.” In other words, economic opportunities are depressed, which is why you might take a step as radical as turning to an outlawed activity which offers a higher opportunity for pecuniary gain and perhaps also some ancillary benefits of the jobs, so non‐​pecuniary benefits. You are self‐​employed, you have more opportunity for leisure if you want to take it, for example.
They weigh those things, then they make a decision, and obviously, not every chooses the same thing. In fact, most people choose not to take the risk of turning to outlawry, and that’s either because their legitimate wage alternative working as a regular member of the workforce offers a higher wage or some other aspect of it to them is more appealing relative to taking on the risk of turning to outlawry. But for some, that trade off militates in the other direction, and so they choose to maximize their income in that fashion.
Anthony Comegna: Let’s get into some of those non‐​quantifiable aspects. We can look at wage rates for sailors, and they’re extremely poor, and their diets, and things like that. But what about some of these more non‐​quantifiable elements? For example, more Marxist historians often portray the captain as some sort of terrorist, an agent of modern capitalism, and these corporate mercantilist trading firms hire captain terrorists to basically coerce the crew as much as possible into producing as much and as quickly as possible.
Peter Leeson: Yeah. The extreme version of that is definitely most extreme and not accurate. I think it’s fine for sort of getting the point across that what is true is that on merchant ships, for example, there were more or less autocratic managers, the captains, who were there to protect the interests of external financiers. Merchant ships were capitalized by wealthy landlubbers. Those guys put a lot of money into these ships and into the cargo that they were carrying, but they didn’t sail on the ships themselves. So in order to make sure that their ships and the cargo were protected, they basically installed someone on their behalf who had autocratic power over the sailors to make sure the sailors did their jobs and didn’t abscond with the goods, for example, and that was the captain. In order to make the captain effective in that capacity of protecting their interests, you needed to give the captain considerable power over the sailors, and that was a very sensible response.
Something that is necessary in order for merchant shipping, at least in the period, to be profitable was to have a captain along those lines. But like with everything, there’s a trade off. There was also a cost to having an autocratic captain, and the cost was that, again, because the landlubber financiers weren’t on the ship to see what was going on, the captain could abuse his authority that he was given by the financiers to benefit himself, not only at the owner’s expense in some cases but also at the sailors’ expense, and that’s what’s highlighted by a lot of what I would sort of call leftist histories of what happened with merchant shipping. And there’s truth to that because there was real scope created by the necessity of autocratic captains for them to self‐​deal at sailors’ expense, and many of them did, sometimes in heinous ways.
And that certainly, I think, contributed to a reason why it is that a person who was on a merchant ship, for example, if given the opportunity might be willing to entertain the possibility of turning to piracy, pirate ships did not have autocratic captains, as a way to escape that. I think that was a real factor in their decision. However, I do not think it was the primary factor. I think the primary factor was the enormously larger pecuniary gains that at least in principle were available to a pirate vis‐​à‐​vis his alternative as a legitimate sailor.
Anthony Comegna: What kinds of sources did you study or have you studied to actually learn about pirates’ behavior? Did you read mainly accounts of sailors or secondary literature? What kinds of things were you able to find maybe from the pirates directly?
Peter Leeson: In general, I use the same sources to study Golden Age pirates that historians of Golden Age piracy use. The most important of these by far, the most significant, popular, and common is Captain Charles Johnson’s General History of the Pyrates, which originally published in the 1720s and then has been subsequently ripped off in sort of innumerable discussions of pirates since the early 18th century. That’s a cheap source. I also, of course, look at primary source documents. The calendar of Colonial Office papers and more generally correspondence between colonial officials, governors and the crown relating to piracy are very important, furnish lots of important first‐​hand information on pirates.
We have a couple of accounts. The one that comes to my mind that I found the most useful and interesting was that by William Snelgrave, accounts of people who were actually … This was a slaver, a merchant ship captain who was taken capture by early 18th century pirates and lived with them and went around with them for quite some time. He published what he observed and his experiences as part of a book he wrote called A New Account of Some Parts of Guinea, and the Slave Trade, I believe. The whole book is not about that, but a good part of it is.
Then there are a decent number of contemporary accounts of the trials of early 18th century pirates from contemporaries, people in the early 18th century who were relaying information of what they witnessed at the trial or heard about the trial. And relatedly, I also in my own work rely quite heavily on a large number of early 18th century newspaper accounts of Golden Age pirates. So this was what was being reported about them by journalists who were getting information from people who had had interactions with pirates or had heard things about pirates and were reporting it sort of to the masses in the newspapers.
So I would say that’s the bulk of it. I’m sure I’m missing some. I should say as an aside for anybody who’s interested in this, there’s a guy named Joel Baer. I believe he’s a historian who published some years ago a tremendous, two‐​volume work that collected, it brought together all kinds of superb primary source documents relating to early 18th century pirates, and it makes it a lot easier for somebody to get … The books are very expensive, but it’s much easier to get access to a lot of those documents today than it was when, for instance, I think when I was researching Golden Age pirates that I don’t believe those works were out yet, so I was sort of hunting around for it. But in any event, anyone who’s interested should look to those volumes, I would say.
Anthony Comegna: I’m very glad you mentioned Snelgrave because if memory serves, in his account when the pirates have him captive, there’s one point where there’s a small fire, I think, that breaks out on the deck, and they think that it’s going to trail its way to the powder kegs, and they’re scared that the ship is about to blow up. And one of the pirates basically says, “Well, it’s about damn time. I’ve been waiting to be sent to hell. What better way to do it than in a big blast?” That strikes out to me because it makes me think, are we conflating terms here when we think of pirates as profit maximizers or utility maximizers? Because I think by most people who would be considered, say, in a court of law as rational and of sound mind, that does not sound like future‐​oriented, profit maximizing, calculating behavior.
Peter Leeson: It sounds like it to me. Think about it from the perspective of‐
Anthony Comegna: Maybe this is why libertarians don’t run the courts of law.
Peter Leeson: This isn’t a libertarian perspective. This is just the perspective of an economist. Think about it. Are you more or less likely to mess with somebody who tells you that they don’t care what happens to them, they’d be happy to go to hell right now, they’re mad men, and they’d be pleased to be blown to smithereens? And there are many. It’s not just in Snelgrave’s case. There are lots of accounts of pirates acting in this crazy fashion where they don’t give a damn and come what may, they’re going to do whatever they want. You’re less likely to mess with that person.
If the people that you’re interacting believe that you’re a crazy madman who doesn’t care about his life or death, then it’s easy for you to … You can essentially from their perspective credibly commit to behaviors, threats that get them to behave in ways that inure to your benefit. For example, by not resisting you even if the odds are against them. It’s a way to preserve oneself. It’s a marketing strategy, if you want to think about it that way. You behave in a certain way in order to create a strategic response from your adversary that inures to your benefit.
And you see this in all sorts of criminal activity. You see this with members of MS-13, for example, returning to them, or other gangs where they act like they don’t care. “I’m super tough no matter what. I don’t fear for my life.” Why do they act that way? One possibility is that they really don’t care and they don’t fear for their life. But lots of other actions that they take seem to belie that fact, suggest that they do in fact care. If you just turn to pirates, I’m flipping back and forth here, but if you look at pirates, for example, if they really didn’t care about their lives and what happened to them, it’s hard to explain the fact that when pardons were offered to them, for example, that many of them took it up, large numbers. Why is it that they did that?
Let me return to my MS-13 example for a minute, if you’ll indulge me for a second. The problem, when I think about it, is basically this. As I mentioned, MS-13 is drug smuggling, human trafficking, murder, so on. Imagine that I came to you and I said, look, I have a theory of why it is that the members of MS-13 engage in these behaviors, and my theory is the following. The members of MS-13 are protesting and seeking to undermine what they view as an exploitative, imperialist economic system of the United States, that through its War on Drugs and its restrictive immigration policy is oppressing minorities, in particular Latin Americans by eliminating employment opportunities for them and building wealth to the capitalists’ benefit on their backs. So really they’re social revolutionaries, and that’s what it is that they’re doing. They’re basically protesting and seeking to smash this oppressive system that has ideas that they disagree with.
I think if I said that to you or to most people, they would laugh in my face, and rightfully so because that’s preposterous. Instead, it seems pretty obvious to us that the reason that MS-13 engages in murder, extortion, drug smuggling, and human trafficking is because they’re trying to make as much money as they can. It’s a criminal enterprise. Now, I think most people, perhaps everyone, would agree with that in the case of MS-13, but now imagine that we fast forwarded 300 years, and a historian was writing a book about MS-13. And he offered the preposterous theory of MS-13’s murder, human trafficking, extortion, and drug smuggling that I just propounded. Well, 300 years distant, people who aren’t really familiar with MS-13, that might sound somewhat more plausible even though we know that it’s silly, it’s not true.
And I think that this is basically the situation that has happened with Golden Age pirates, is that with a couple hundred years later when nobody is around to see them, it seems reasonable to think that they were these social revolutionaries and that they cared about equality and justice and they were just fighting the oppressive burgeoning capitalist system when in reality they were just like the members of MS-13 just trying to make as much money as they could. And I think it doesn’t follow from this that it means that pirates only ever cared about money, just like no person only ever cares about money. It doesn’t mean that. But it does mean that people who are interested predominantly in social justice and ideas, for example, in the ways its been expounded by some historians tend not to make a living by murdering people and robbing them at gunpoint, taking the money for themselves, spending the money on themselves on hookers and rum. That tends not to be what they do. We don’t think of that as basically ideologically‐​driven behavior.
So oftentimes when I talk about pirates and alternative views, I call that view that I’m objecting to “pirate exceptionalism” because it wants to paint … Which is easy to do because they’re removed from us. It wants to paint pirates or attribute to them behavioral motivations that we wouldn’t normally attribute to people engaged in the kinds of activities that pirates are engaged in. And remember what they were doing. They were murdering people and robbing them at gunpoint in order to take their stuff so that they spend the stuff that they stole from people on themselves. That sounds like just what MS-13 does. It sounds just like what we would ordinarily describe as profit‐​driven behavior. It sounds very much like what privateers were doing, for example.
One last comment on this, by the way, while I’m thinking of it. Remember that I said earlier, and as far as I know all historians agree on this fact, is that many pirates were former privateers. So these same guys in, let’s say, 1712 when they were engaged in the same activity as pirates but they were called privateers, historians are happy to describe them, and people in general are happy to describe them as being profit driven, trying to make money. Fast forward two years, change their name to pirates, and all of a sudden it’s not about money, they’re just about equality and justice. That’s nonsense. It’s utterly … That’s the same people two years later doing the same thing. Presumably, their goals did not change.
Anthony Comegna: Now, I think part of the argument would be that, or the response to you would be that there is a long back history of the growth of more oppressive systems spreading around the world and a popular sort of bubbling from below response that goes on from the time of enclosure in England and in other places and perhaps back further and carries all the way up through the early modern period into today, that this process never stopped, this ideological resistance to new forms of oppression. So you can’t quite distinguish, well, privateers had no problem. What about the sailors who were still more or less impressed into the ship to work? They might’ve had a charter for their ship by the king to go after Spanish vessels, but they were still impressed sailors for the most part, paid a paltry sum and living under horrible conditions and more or less forced into obedience by the captain, captive on the ship. What kinds of ideology did you see or do you actually see among the pirates? Is there any sense that they are members of a distinct class of people?
Peter Leeson: I think that you could describe them that way, but it would be arbitrary and misleading or distortive of reality to do so. Yes, it is true just like with the members of MS-13 do not tend to be people who have high human capital levels whose relative alternative was working in Silicon Valley, for instance. Pirates were not people who had high‐​wage alternatives in legitimate employment on land, which is part of the reason why piracy was attractive to them and not to people who did have those opportunities. So in that sense, yes, of course there’s commonality. That’s true across basically labor types in general, but I don’t think that we really get anything out of that. I don’t think that yields any particularly special insights apart from those that come from the ordinary economic ones that will apply to that group of people because they face similar opportunity costs.
So to me, it is a very forced interpretation, one that I don’t know but would seem to have some kind of agenda to it that would basically play up the idea of kind of a piratical class consciousness or some ideological edge to what they were doing relative to the very obvious fact of what pirates were doing, which was killing people to take their money so that they could have that money. So I think that’s the standout feature. None of this is to deny any of the stuff that you were saying before. All these problems were true. Things were bad for many people. I’m not denying that. But when it comes to what was motivating pirates, I don’t know why we would want to overlook the obvious fact of what it is that they were doing and the obvious fact of what we know quite clearly they were interested in, which was not pursuing an ideological agenda.
Look at pirate articles, for example. These are the infamous pirate constitutions, the pirate code, whatever name you want to … Pirates called them their articles. Here are the standout features of the articles to me, at least some very important features of them. One is that they were employment contracts. They explicitly doled out or aimed to articulate the terms of piratical employment. No pirate was working for free, so clearly they were interested in money. Second, pirate articles almost always included provisions for pecuniary bonuses for people who engage in activities that inured to the crew’s total profits such as spotting the first prize, for example, or exhibiting special bravery in combat. Pirate articles also typically had a provision that actually said the crew is not allowed to break up until we’ve made a certain sum of money, so people can’t go their own way until we’ve all earned enough. Pirate articles also always had rules that said no stealing money from each other, which is a kind of curious thing to do if you’re not interested in money and if pirates are not interested in earning money.
There are other examples as well, but the point is each one of those features of articles is difficult to explain if pirates weren’t in fact interested in making money as a primary motive. The articles didn’t say things like, “Hey, when we take money, we need to make sure that we give it to other members of our class who happen to be landlubbers, other poor guys who are being oppressed.” Or “We need to redistribute the booty that we take to merchant sailors on other ships.” They didn’t say things like that. What they said was, “We care about money. Here are the things we’re going to do to incentivize you to make even more money.” And then when they got the money, they kept it and spent it.
So if there are ideological concerns, they certainly seem to be weighing very small in the balance relative to the prospect or the concern with material gains, and that would make pirates pretty much just like everybody else. It’s not that we don’t care about other stuff. It’s not that we don’t have ideas and those things don’t matter to us. They do, but most of us think about our occupations, which is what piracy was, it was an occupational choice, as a form of production, a way to make money rather than a form of consumption, something that we do for fun. A fact of life is that life is expensive. It costs money to live. So naturally, how much money we make in a particular employment line weighs quite heavily in what job opportunity it is that we take, and I don’t see any reason that we should think about pirates as different from that.
Anthony Comegna: Perhaps part of the problem is that in the records that have come down to us, like you mentioned Charles Johnson, all through that book the records of the pirates are very often the unusual examples of pirates who had a lot to say. They had a lot of ideas, and that’s why they got recorded in a book like that, or they were especially violent and anger‐​driven people. So it sort of obscures the average pirate’s motivations and activity perhaps.
Peter Leeson: It might, but again, I think a sober look at the basic framework of piracy, that stuff … I remember reading the philosopher pirate Sam Bellamy, these speeches, which are probably apocryphal. Maybe they’re not. Maybe that’s real. Who knows? If you look at the sort of facts of piracy, if you’re willing to sort of accept that term, I realize that that’s kind of what we’re discussing a little bit, but it seems pretty clear to me that those things pointed strongly in the direction of, “How do I get more for me?,” not in the direction the sort of philosophical side that comes out in a speech of Sam Bellamy.
Anthony Comegna: Now, part of what pirates did was they made a public show, at least on their ship, of declaring war on all nations. The governments regularly referred to them as scum and villains and outcasts of all nations and things like that, and the pirates responded accordingly by declaring war on all merchant vessels and all national shipping. But they lost that war. And in the 1720s, well, after the War of Spanish Succession, the great nation‐​states and empires all collaborated together, some more closely that others, to exterminate the pirates in the Atlantic. And they basically did. So then my question is, well, is it actually a poor example of an anarchist social legal order in operation if these nation‐​states can crush it like that?
Peter Leeson: I would say no. To me, there’s nothing surprising about the fact that the strongest navy in the world was able to blow up what amounted to a couple dozen ships by sort of these ragtag thieves. So at the height of the Golden Age of Piracy, there were about 2,000 of them, and the average crew was like 80 guys. So let’s say you’re looking at 25 or 30 ships. That’s not going to pose much of an … There’s nothing shocking about the fact that the navy of England could easily decimate this number of guys if they wanted to. That doesn’t tell me anything about, to me anyway, it doesn’t say anything to me about the workability of anarchy. It just says that really strong forces can very easily handle very weak forces or very small forces relatively.
To me, what the pirate episode with respect to anarchic governance suggests is that, first of all, such governance is maybe workable under circumstances or in cases where we think it might be least likely to work. I think most people are generally surprised by the idea that a pack of murderous thieves was somehow able to secure without any official government, devise its system of rules that worked reasonably well to secure cooperation among each other. I think that’s one piece.
The other piece that I find, what I think is one of the more important lessons about anarchic governance that comes from pirates is that private governance can be, even when created by murderous thieves, can be quite sophisticated. So a lot of the examples of anarchic governance to the extent that people are familiar with them, what they might be familiar with are systems that worked kind of like a blood feud system, a system fundamentally predicated on retribution via violence. And there was certainly of course an element of that in pirate governance as well, but the striking aspect of pirate governance to my mind was that it actually much more closely resembled a system of constitutional democracy, one that would be very familiar to people who are familiar with America’s form of government today. I think that’s a truly remarkable thing when you think about the time in which pirates were developing the system.
Anthony Comegna: Leeson’s latest book is WTF?!: An Economic Tour of the Weird, and it will be published in October 2017. WTF?!, like his many other books and articles, expands on Leeson’s efforts to fuse historical and economic analysis. It may not always be a happy marriage free from conflict, but both perspectives are necessary if scholars ever hope to grow beyond the traditional confines of their own fields. A holistic science of human action incorporates both microeconomic theory and gritty, bizarre historical reality.
Liberty Chronicles is a project of lib​er​tar​i​an​ism​.org. It is produced by Tess Terrible. If you’ve enjoyed this episode of Liberty Chronicles, please rate, review, and subscribe to us on iTunes. For more information on Liberty Chronicles, visit lib​er​tar​i​an​ism​.org.