Peter Leeson’s book, The Invisible Hook: The Law and Economics of Pirate Tolerance was written only six years ago, but has become a hit in the discussion of economics. Why has this short nonfiction book become such a hit? Its history of the anglo-american pirates and their hierarchical structure is surprising given the common understanding of pirate culture. He writes, “analogous to Adam Smith’s invisible hand, whereby lawful commercial self-interest seeking can generate socially desirable outcomes, among pirates there was an ‘invisible hook,’ whereby criminal selfinterest seeking produced a socially desirable outcome in the form of […] tolerance” (Leeson 140). The pirates’ self interested nature caused them to have one of the most egalitarian societies in the world at that time. This fascinated his readers, which has led to the great response.
Does such a large reaction to the book necessarily mean that the conclusions Leeson draws from this characterization of the pirates are correct? Many of the responses to the book were simply a summary of the varying author’s’ fascination with the characterization, but one response stands out among the others. Virgil Henry Storr writes about “The Hidden catch in The Invisible Hook.” He will argue that the terms applied to pirate crews are inappropriately assigned, therefore the comparison between pirates and other groups is faulty. Also, Paul Oslington would argue that the current understanding of Adam Smith’s Invisible Hand is not what was originally understood by early audiences. Therefore, Leeson’s very description of the pirate phenomenon might be misapplied. My paper will intend to find the complexities between these arguments.
Throughout the book, Leeson describes the life of the Anglo-American Pirates of the 17th and 18th centuries.These pirates exploited the developing trade routes that connected the British empire, mostly in the Caribbean and the Atlantic Ocean. They became very successful, leading to this era from 1690 to 1730 being named, The “Golden Age of Piracy” (Leeson 146). Most of the men came from a background of merchant, or naval training, usually leaving their former employment because of distaste for the autocratic structure of the ships (Leeson 142). Surprisingly, a pirate ship was considered to be a more pleasant working environment than on legitimate merchant vessels. The structure of a pirate ship was far more egalitarian than the structure of not only any ship, but virtually any society of that era. All officers, including the captain, were elected by the entire crew. The captain had unchecked authority during battle and quarantine, but in times of peace, he was considered a common member of the crew, with no civil authority. For organization during peacetime, pirate crews elected a Quartermaster, who carried out discipline and settled disputes. In most crews, the laws were also voted on; they created charters that were officially enforced by the Quartermaster, but the crew would frequently use the force of the majority to enforce any rules, written or unwritten, that were broken.
Pirate society also had virtually no income inequality. When any loot was gained, they would split it into values of shares. Each common pirate earned 1 share, and the officers received anywhere between 1.25 and 2 shares, almost never exceeding 2 shares (Leeson 151). This prevented class-like formations of disparity. This income equality is unlike any “legitimate” ship, merchant or naval, where the wage difference was significantly greater. As for the purpose of this arrangement, there was little need for management to encourage or force hard work, because they employed the high-power incentive of shareholding. Pirates naturally worked hard, since they received a consistent percentage of whatever they stole, leading to a high-earning theft. Unlike in a military battle which requires the threat of death for desertion or defying orders, pirates rarely had to be encouraged to fight their hardest, since their stake on a large sum of money was dependant on their success at battle.
A final characteristic which is most emphasized in The Invisible Hook, Pirate societies were also very racially tolerant. Many crews had significant black populations, and most if not all, Leeson claims, were free blacks, while the vast majority of the African-descended on the mainland United States were enslaved. He writes that unlike on land, where there is usually a sole owner of a slave who reaps 100% of the slaves’ returns, pirate crews co-owned all of the bounty, so the added returns from each slave was divided between each of the pirates. Also there was a high risk that an escaped pirate slave would happily turn their captors into the authorities, which was too much of a liability. For a slave, there was no incentive to fight against enemies, or to work hard in other ways, since they earned no commision. This made a slave on a pirate ship simply another mouth to feed without a self-motivated work ethic. Therefore, Leeson argues, the reason black pirates were treated as equals was not out of progressive thinking, but a decision based on risk analysis.
“Analogous to Adam Smith’s invisible hand, whereby legitimate persons’ self-interest seeking can generate socially desirable outcomes, among pirates there was an “invisible hook,” whereby criminal self-interest seeking produced a socially desirable outcome in the form of racial tolerance. It was this invisible hook—rather than enlightened pirate thinking— that fostered pirates’ racial tolerance” (Leeson 144). Italics added.
This was the driving theme in his whole book; he characterized pirate society as unexpectedly egalitarian, whose brutality and self-interest was the cause for the positive qualities. He argued that the invisible hand requires self-motivation that leads to actions that eventually prove positive to society. Leeson takes the pirates, whom pop culture would maintain as likely poster-children for selfish behaving, and enhances their description by “criminal” selfinterest to distinguish them from the rest of society’s moderate level of selfinterest. Even the most ruthless of criminals provide a positive social outcome. Perhaps their extreme selfinterst provided an extremely positive outcome in proportion?
Virgil Henry Storr responds to Leeson’s book in the essay “The hidden catch in The Invisible Hook.”
“In The Invisible Hook, Leeson argues that by devising a complex system of rules (called the ‘pirate code’) and procedures for electing their leaders, pirate societies created governance structures where the leaders were strong enough to ‘control the governed’ but were not strong enough to break the constraints that bound them. There is, however, a ‘hidden catch’ within The Invisible Hook. There are important differences between pirate crews and societies, between pirate captains and political leaders, and between the pirate code and constitutions. Moreover, understanding these differences is critical for understanding how criminal bands were able to accomplish a feat that still proves problematic for many societies” (Storr 294).
He goes on to argue that Leeson’s parallel between the invisible hand and the invisible hook is not perfect since the invisible hand requires a society, and pirate crews weren’t actually societies. He makes that conclusion by accepting the definition of Friedrich Hayek, an influential economist who defended classical liberalism, an ideology whose supporters frequently argue for the existence of the invisible hand.
“Hayek (1973, 1979) has pointed out that a society is a spontaneous order. As he writes, ‘it is advisable to reserve the term ‘society’ for this spontaneous overall order so that we may distinguish it from all the organized smaller groups which will exist within it, as well as from such smaller and more or less isolated groups as the horde, the tribe, or the clan, whose members will at least in some respects act under a central direction for common purposes.’ Properly understood, then, society is formed or grown and so has no teleos. To be sure, the existence of a society may enable its members to successfully pursue a diversity of purposes. But that it serves one or a number of functions (e.g., allowing its members to cooperate) does not mean that society as such has a purpose” (Storr 294).
Pirates were far from a spontaneous order. They were actively formed in order to reach a common goal: to accumulate the greatest possible wealth. They were an extremely isolated group, only 80-200 of them in a group, even smaller than the examples Hayek provides. Pirates didn’t act under a central direction for common purpose in just “some respects,” but in nearly everything. As workmates they worked towards the common goal of successfully running a ship, and as fellow fighting-mates, their goal was to subdue as many “others” as possible. Pirate crews certainly had a common telos, “an ultimate end” (Webster 1461), according to Storr’s summation. Storr continues to discuss societies, “On the contrary, as Hayek writes, ‘anyone aware of the complex nature of this net of relationships determining the processes of society should also readily recognize the erroneous anthropomorphism of conceiving of society as ‘acting’ or ‘willing’ anything’” (Storr 294). Pirates crews were therefore not societies by these definitions, in the way that Adam Smith’s invisible hand necessitates. The pirate crew was too small and decisive of a body of people to be a society. It was small enough to have a common telos, and to act together in order to accomplish their will.
Storr suggests that a view of the crews as firms is a more accurate characterization. A return to Leeson’s text would support this as well. Leeson uses the word “firm’ to describe pirates over 40 times in his book. Storr agrees that “firm” is an apt description of pirate crews, and that “society” is not.
“The individuals who manage and work for the corporation must cooperate in order to achieve [a] common purpose. This does not mean that individuals involved with the firm do not often have alternate individual agendas but, simply, that these agendas are necessary aligned or must be aligned with the overall purpose of the firm if the firm is to succeed. The same is no less true of pirate crews which more closely resemble worker managed firms than they do societies” (Storr 294).
If the crews were not societies, but firms, then perhaps the invisible hand doesn’t apply to them at all. It should be no surprise that the pirate firms were able to form an egalitarian culture within its ranks. Perhaps it was simply a “firm culture” that proved to be the most suitable option for their position in a market; nearly every successful firm develops one. The piratical firm simply found a way to organize their culture in a way that best handles their unique intra-firm issues. They are uniquely ruthless and self-interested, so there was a need for strict equality, otherwise there would be potential violence. Their egalitarianism was simply a necessity for a firm, not a manifestation of the invisible hand.
A potential issue with Storr’s critique arises when considering how pirates interacted with others they encountered. Not only were the pirate crews egalitarian within their ranks, they proved to be tame in their interactions with other ships. When asked on Freakonomics radio, “You write that pirates weren’t necessarily the bloodthirsty fiends we imagine them to have been. How does the invisible hook explain their behavior” (Dubner Freakonomics)? Leeson replies,
“In order to encourage merchantmen to surrender, they needed to communicate the idea that, if you surrender to us, you’ll be treated well. That’s the incentive pirates give for sailors to surrender peacefully. If they wantonly abused their prisoners, as they’re often portrayed as having done, that would have actually undermined the incentive of merchant crews to surrender, which would have caused pirates to incur greater costs. They would have had to battle it out more often, because the merchants would have expected to be tortured indiscriminately if they were captured” (Leeson, Freakonomics).
Here is an example of a way in which pirates were not only affected by the “invisible hook” in regards to their actions within their group, but also with interaction with others. The pirates needed to provide an incentive for the ships they attacked to surrender quickly, since it was in their interest not to fight. Pirates held the power to abuse their prisoners in any way that they pleased, but they didn’t because it served their own interests not to. This “socially desired outcome” was not within the pirate firm, but in fact in relation to the outsiders. The invisible hook managed to affect how the pirates interacted with the greater society. This does not discredit Storr’s critique of the description of pirates as a society, but it does allow room for the invisible hook to be applicable. The pirates’ selfinterest seeking – wanting a quick surrender rather than a bitter fight – incentivised them to interact with the greater society in a way that produced a socially desired outcome.
The very definition of the Invisible Hand that both of the aforementioned authors have been working with may not be what was originally intended by the man who coined the term, Adam Smith. In his essay, “God and the Market: Adam Smith’s Invisible Hand,” Paul Oslington refers to the invisible hand as, “one of the most used yet least understood phrases in contemporary ethical discourse” (Oslington 476). He argues that Smith was referring to the general providence of God for His people, not specifically market interactions.
“The interpretation I am offering of Smith’s invisible hand is that it expresses the doctrine of providence. Others have pointed out the connections between the doctrine of providence and Smith’s ideas about self-interested behaviour mediated through market institutions working for the general good (notably Viner 1927, and more recently Waterman 2004). The crucial nuance I’m adding to make sense of the invisible hand is the distinction between general and special providence. The invisible hand metaphor is Smith’s acknowledgement of the possibility of special providential divine action in the economic system to guarantee its stability. In Smith’s understanding of the divine economy the special providential invisible hand balances the general providential activity of God in markets” (Oslington 433).
If Smith was only referring to the providence of God, how did it become the default argument against governmental regulation of markets? This raises the question of whether there was outside evidence that led economic liberals to conceptualize the invisible hand in this manner. Perhaps stories of things like that which is represented in The Invisible Hook led economic theorizers to apply the term to everything.
Despite it being his most commonly referenced term, Adam Smith wrote of the “invisible hand,” only three times in his published works. He never defines it himself, but a common definition is: “the self-regulating nature of the marketplace in determining how resources are allocated based on individuals acting in their own self-interest” (Farlex). Economic liberals often use this concept to criticize government regulations of the market, because they believe the invisible hand regulates it already. What if this application of the metaphor was not Smith’s intention? This would mean that nearly all of the modern applications of this term are incorrect, and Smith should not be referenced in the way he is. It certainly means that the invisible hand should not be used to defend liberal economic policies as if Adam Smith himself was argueing it. But how does this apply to Leeson’s book? It means that the interpretation Leeson places on the concept might be unhistorical. But it doesn’t take away the comparison. Leeson’s reference was to the current understanding of the concept, and any critique of the comparison should be between Leeson and the modern interpretation, not the historical.
Now that the modern definition of the invisible hand is assumed, let us make sure we are reading the argument presented in the The Invisible Hook accurately.
Perhaps it is unfair to criticize Leeson’s use of the invisible hand to describe pirates, because he does not clearly claim that the pirates were an example of the invisible hand manifesting. He writes “Analogous to Adam Smith’s invisible hand..” (Leeson 144) Italics added. “Analogous,” according to Webster’s New World Dictionary, means, “similar or comparable in certain respects” (Webster 49), not that they are the same, or should be considered the same. All that Leeson is saying here is that his invisible hook is similar or comparable in certain respects to Smith’s invisible hand. Considering this, perhaps Storr’s critique of Leeson’s use of “society” to describe the pirates is irrelevant to the book’s main argument. If Leeson was attempting to argue that the pirate’s behavior was an example of the invisible hand, and policy makers should follow this set up because it works, then it would be important to consider the nature of the pirate’s social set-up. It would be important to know if they functioned as a society if we are to model other societies after them. However, if Leeson was just highlighting features of the pirate’s social setup, and not claiming anything about implications for other societies, his choice of description matters considerably less.
This reading of Leeson’s “analogous” phrase also impacts the connections drawn to Oslington’s writings. Yes, Leeson’s understanding of the invisible hand seems to be the modern interpretation that Oslington rejects as misguided and unhistorical. Leeson’s use of the term could be used to add to the collection of modern economists who continue to appropriate the term into a favorable meaning. This matters significantly less, however, when one considers that Leeson was not directly using the invisible hand to support his argument, but rather using it as a clever reference. He was simply drawing a connection between the selfinterest of the pirates causing social good on a small scale, similar to how the current understanding of the invisible hand causes social good on a large scale.
In conclusion, it is no wonder why there was such a great response to The Invisible Hook. It shed a new light on pirates, a band of people that is usually portrayed in fiction as ruthless. The perception of Anglo-American Pirates in featured-films as self-concerned, violent, wealth-seekers is not inaccurate. However, as Leeson describes, the effects of this self-centeredness was the creation of one of the most egalitarian societies the criminal world had ever seen. Rights flourished and developed in their social structure, while rights were continually squashed by the leadership of their legitimate counterparts. This was obviously not out of moral obligation, since they were ruthless, criminal wealth-seekers; they had little if any intention to create any positive experience for anyone but themselves. This shockingly contrarian description of the pirates makes sense of the overwhelmingly positive response from Leeson’s readership.
Although there are a handful of critiques of Leeson’s premises in his arguments, his descriptions still stand their ground. Yes, he describes the crews as a society, when according to Oslington, “firm” would be a better description, but this does not discredit the general description of their egalitarian structure. Whether the pirates had a manufactured common interest or a spontaneous inception does not change the positive social outcomes their crews created. There was income, status, and racial equality amongst the ranks no matter how the crew is conceptualized. Oslington’s contention with the modern usage of the invisible hand should also not discredit Leeson’s description. Perhaps it might make the title “Invisible Hook” seem less clever, since the invisible hand is different than Leeson understands it, but that does not take away the historicity of Leeson’s account. Leeson’s pirates were shockingly egalitarian in a situation in which any crew member would gleefully subjugate any other man for their own benefit. That alone should validate the overwhelming amazement the book brings to its readers.
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Storr, Virgil Henry. “The “Hidden Catch” in the Invisible Hook.” Review of Austrian Economics 23.3 (2010): 293-8. ProQuest.Web. 16 Nov. 2015.